Silicon Valley Could Be Heading For a New Stock Collapse.

First time accepted submitter billcarson writes "Even though for most of us the recession is far from over, analysts are worried the technology sector might be near the end of a bubble. Technology stocks are at records highs at the moment. Companies that have no sound business plan have no difficulty in raising capital to fund their crazy dreams. Even Yahoo is again buying companies without real profit (Tumblr). Andreessen Horowitz, a major venture capitalist in Silicon Valley is already pulling up the ladder. Might this be an indicator for more woe to come?"

Yahooblr

[simonbp]

Yahoo's recent desperate moves (e.e. buying Tumblr) are hardly indicative of the industry, but rather one company that really shouldn't be as big as it is. Silicon Valley as a whole is a lot more healthy than Yahoo.

Systemic debt

[Livius]

The problem is a *debt* bubble. Either the debt is extinguished in a bubble collapse - housing, stock market, student loans, tech stock, etc., or it becomes inflationary. As long as debt is above a sustainable level there *has* to be one bubble or another.

Re:Yahooblr

[fuzzyfuzzyfungus]

The point isn't that all of Silicon Valley is as incompetent as Yahoo; but that the cash is flowing freely enough that even a company whose business model appears to be "Try to be Google, as imagined by an AOL user" can throw a billion dollars at some goofy blogging platform.

Now, I would not be at all sad to see fewer smart people wasting their lives trying to find new ways to get me to click on ads or analyze my behavior to sell me shit, (and there's a disturbing amount of brainpower going down the toilet on just that problem at the moment); but the trouble with a big wave of easy, dumb, money is that, while the crest is a blast, it can easily take down even solid people and ideas when the VCs eventually get spooked.

Just remember how much fun the economy of more or less the entire developed world managed to have, just because some banks were gambling on US real estate. Barely any connection to whether the economy of people who actually do and make things was stupid or brilliant, doing well, or doing ill; but down it came...

Define woe

[WillAffleckUW]

Overpriced assets need to come down sometime.

FB will be dead soon. Twitter IPO overpriced (but still not that bad). Most Silly Valley stocks are based on insane projections for the most part.

I used to do tech IPOs. My money's in broad S&P 500 low cost index funds now.

(yes, I made lots of money from the tech IPOs, and the other IPOs)

Re:not to wish bad things on anyone

[farble1670]

the economy isn't interconnected at all right? it might even reduce your commute to staying your house.

wait for it ... "but i work in the ___ field, so i'm not affected ..." in 3 ... 2 ... 1.

Re:Bullshit from statists.

[ebno-10db]

It's getting harder and harder to figure out whether a post is real or a parody.

Not seeing the same trends

[RogueWarrior65]

The Dotcom crash happened mostly because there was a massive gold rush to throw money at any startup that said they were going to do cool things on the web. But there was way too much money being spent on Aeron chairs and expensive digs and nothing being spent on figuring out if the idea was good. This comes from having been to a lot of bankruptcy auctions. Hell, the CEO of one company spent investor dollars on a powered paraglider. Da fuq? I also wonder if Y2K was something of a catalyst. In the 90s, companies were spending gobs of money to prepare for Y2K. When that came and went without a hitch, all that money evaporating and may have caused investors to question their other high risk ventures.

The housing bubble was could be seen a mile away by anyone who wasn't living in a utopian stupor. You can't force banks to issue sub-prime mortgages knowing full well that most of those buyers couldn't keep up with the payments without the lenders passing the hot potato to the next sucker. BTW, CDOs and mortgage-backed securities had been around for 20+ years without a problem. Again, the gold rush of house flipping was eventually going to crash when the music stopped in the form of enough people saying "You want HOW MUCH for this P.O.S house?! Nope."

Honestly, I don't really see the same scope of bullsh*t in Silicon Valley. Social networking companies are at risk because they don't have a tangible product just as dotcom companies didn't in 2000. But the hardware companies aren't going away. Will other companies get injured as a few collapse? Sure, but that would be panic selling and hence a good buying opportunity.

Where have I heard this before?

[ebno-10db]

While unemployment generally may be high, in the tech sector it is very low.

How about some actual, you know, statistics.

Tech companies, led by Mark Zuckerberg at Facebook, are lobbying Congress to relax immigration rules so they can hire more foreign talent because they believe domestic talent has gotten too scarce and too expensive.

And that's evidence of a shortage? They've been pushing for more of this crap for 20 years, rain or shine.

I also notice that almost the entire article is about Silicon Valley, which despite its pretenses of being cosmopolitan, or even "globalized" (whatever the hell that means), is one of the most provincial places there is. Here's a clue: there are parts of the US outside of the Bay Area. Amazing but true! Some of those places are tech hubs with lower salaries. Having trouble finding people at a reasonable price? Branch out. It's hardly a new business strategy. The geniuses who claim to have destroyed the barriers to long distance communication don't want to take advantage of it (except to India of course). I know that denizens of the valley are afraid to get on a plane to someplace like, say Pittsburgh, where they have a dreaded thing called "snow", but you can tough it out. Look on the bright side - the plane trip is much shorter than across the Pacific. You can even use Google maps to find this place called "Pittsburgh" [google.com].

Even companies with real profits are overvalued

[msobkow]

Google, Apple, and a few others are overvalued right now as well.

But the stock market is all about gambling, not real value. Most of the big players treat it like monopoly money, because it's not coming out of their own pockets. :(

That's a problem with the stock market overall, though, not just tech stocks.

Re:Systemic debt

[ebno-10db]

The problem is a *debt* bubble.

A stock bubble is not a debt bubble, since cash is usually paid for stock (and even when not margin is limited to 50%). Neither the bursting of a stock bubble or a debt bubble is much fun, but the debt bubble is much worse. If stocks crash people say "dagnabbit, lost a bunch of money", but they're not left in debt. When a debt bubble like real estate crashes, you're not just poor, you're also in debt. That makes it extremely difficult to get the economy running gain, as so much of people's money is being sucked up by loan payments.

Re:Define woe

[asmkm22]

I'm not convinced that Facebook is going away anytime soon. Like it or not, they've entrenched themselves pretty deeply in the internet. One of the best moves they did was push for their service to be used as a general login platform for other sites. Hell, you can even use your facebook account to log into MySpace. Even Twitter seems to have a ton of staying power, simply because it's so widely used by certain types of people to disseminate opinions. Fortunately for Twitter, those types of people have a hell of a lot of influence, like politicians, game designers, actors, and media personalities. They'll figure out a way to bring ads to the service, just like Facebook has, which is about the only thing that matters anymore when it comes to running a tech company these days.

Re:Define woe

[HockeyPuck]

Let me translate this for you:

I used to do tech IPOs. My money's in broad S&P 500 low cost index funds now.

(yes, I made lots of money from the tech IPOs, and the other IPOs)

Translation from Douche to English:

I made piles and piles of cash during the dot-com bubble. Enough to afford a Tesla and a $1.5m 1500sqft home in Cupertino. However, now that I have all this money, I can afford to diversify. If I didn't have all this IPO cash, then I'd never have the money necessary to send my kids to $20k/yr kindergarten, Challenger Elementary School and then either St. Francis or Bellermine High Schools.

I'm really just writing this to flaunt about how lucky I was to have invested during the dot-com bubble and now I'm telling you to follow my lead, however, you can't since the dot-com bubble is over, so you'll have to get used to taking low digit yr/yr gains of the broader stock market.

Re:Systemic debt

[dbIII]

Pretty sad really. Utter traitors like North and Poindexter who sold weapons, via Iran no less, to a terrorist group that killed over a hundred US Marines less than a year before still have cushy government jobs while a mere whistleblower is likely to have to look over his shoulder for the rest of his life as if he was Nazi war criminal.

even more corrupt and considerably less free than the one he left

For the moment, but the race to the bottom is on and the US is catching up quickly.