Ask HN: Are we in tech-stock bubble? • Hacker News Board

Re: Ask HN: Are we in tech-stock bubble?

#31

Post by thewarrior » Mon, Dec 28, 2020, 1:46 AM UTC

cwwc wrote: post #6

tonystubblebine wrote: post #2

TSLA? No idea. But I think there's often some hidden game going on with tech companies that go well beyond selling more sugar water and expanding overseas to places that haven't seen sugar water before. Amazon is the best at this... using one business to launch a second. So what I'd look for with TSLA is not whether cars can ever justify this price, but whether there is an adjacent business that is actually bigger th…

There is a secret sauce: pairing a company (Amazon.com) with heavy net operating losses (NoLs) with a very profitable company (AWS). The result? Amazon pays zero taxes and can continually expand. The NoLs offset the profits, and every time Amazon has a division that becomes profitable they offset it by entering a promising but loss-inducing new sector. Then, when that division becomes profitable - rinse and repeat. T…

Are taxes such a serious constraint on company growth when funding is so easily available ?

Re: Ask HN: Are we in tech-stock bubble?

#32

Post by voodootrucker » Mon, Dec 28, 2020, 1:52 AM UTC

cwwc wrote: post #6

tonystubblebine wrote: post #2

TSLA? No idea. But I think there's often some hidden game going on with tech companies that go well beyond selling more sugar water and expanding overseas to places that haven't seen sugar water before. Amazon is the best at this... using one business to launch a second. So what I'd look for with TSLA is not whether cars can ever justify this price, but whether there is an adjacent business that is actually bigger th…

There is a secret sauce: pairing a company (Amazon.com) with heavy net operating losses (NoLs) with a very profitable company (AWS). The result? Amazon pays zero taxes and can continually expand. The NoLs offset the profits, and every time Amazon has a division that becomes profitable they offset it by entering a promising but loss-inducing new sector. Then, when that division becomes profitable - rinse and repeat. T…

> This is Bezos’ genius.

His genius is gaming a readily game-able tax system for personal gain and public loss?

I do agree it's what he's good at, but I disagree about it being "genius" and question whether it's worthy of praise.

Re: Ask HN: Are we in tech-stock bubble?

#33

Post by Negitivefrags » Mon, Dec 28, 2020, 1:53 AM UTC

hindsightbias wrote: post #3

Unlike the dot-com era, Tesla makes real things. The valuation is unimportant as long as there isn’t something else for cash rich people to put their money into. Same for BTC or beach property.

Amazon did real things during the dot-com era and that didn't stop it's stock crashing 90%.

Tesla is doing real things and is a great company that I'm sure will be profitable and do well in the future.

Doesn't mean I don't think that it's stock price is still inflated by 10x right now.

Re: Ask HN: Are we in tech-stock bubble?

#34

Post by mehrdada » Mon, Dec 28, 2020, 1:53 AM UTC

thewarrior wrote: post #29

cwwc wrote: post #4

TSLA? Not justifiable from a pure numbers standpoint. But - other tech stocks? Arguably justifiable. Since the risk free rate (treasuries) has cratered, this has altered the DCF calculation that analysts use to value a company (the outcome is essentially this: the company is worth more, because this risk free rate is used in discounting the PV vs FV of the company’s cash flows). Thus, it makes sense to have companies…

One thing I don’t understand is this DCF rate is essentially decided by the government. It seems weird to me that all the government needs to do make the stock holders richer is to drop interest rates to near zero. That seems like creating wealth out of nothing.

It creates money out of nothing, which is distinct from wealth.

Re: Ask HN: Are we in tech-stock bubble?

#35

Post by jungturk » Mon, Dec 28, 2020, 1:54 AM UTC

thewarrior wrote: post #29

cwwc wrote: post #4

TSLA? Not justifiable from a pure numbers standpoint. But - other tech stocks? Arguably justifiable. Since the risk free rate (treasuries) has cratered, this has altered the DCF calculation that analysts use to value a company (the outcome is essentially this: the company is worth more, because this risk free rate is used in discounting the PV vs FV of the company’s cash flows). Thus, it makes sense to have companies…

One thing I don’t understand is this DCF rate is essentially decided by the government. It seems weird to me that all the government needs to do make the stock holders richer is to drop interest rates to near zero. That seems like creating wealth out of nothing.

Isn't the asset wealth being created at the expense of interest income from cash holdings (e.g. savings accounts and the like)?

Re: Ask HN: Are we in tech-stock bubble?

#36

Post by ykevinator » Mon, Dec 28, 2020, 1:55 AM UTC

voodootrucker wrote: post #32

cwwc wrote: post #6

Earlier quoted context omitted.

There is a secret sauce: pairing a company (Amazon.com) with heavy net operating losses (NoLs) with a very profitable company (AWS). The result? Amazon pays zero taxes and can continually expand. The NoLs offset the profits, and every time Amazon has a division that becomes profitable they offset it by entering a promising but loss-inducing new sector. Then, when that division becomes profitable - rinse and repeat. T…

> This is Bezos’ genius. His genius is gaming a readily game-able tax system for personal gain and public loss? I do agree it's what he's good at, but I disagree about it being "genius" and question whether it's worthy of praise.

Morality is not real, he is a genius at this.

Re: Ask HN: Are we in tech-stock bubble?

#37

Post by hn_throwaway_99 » Mon, Dec 28, 2020, 1:57 AM UTC

Another commenter mentioned this, but it's important to understand the net present value calculation, which is:

NPV = Rt / (1 + i)^t

Rt is the incoming cash flow at time t, and i is the discount rate. This is the "theoretical" way that businesses should be valued: estimate their future cash flows, then discount them back to the present to take the time value of money into account (of course, in the real world, there is a lot more that goes into the price of stocks).

The issue is that as the discount rate approaches 0, the net present value then equals the same as ALL future positive cash flows. For large, perpetually operating businesses, this can then turn into something between "a lot" and "infinity".

Again, there are lots of other things that go into actual stock prices, but our economic system really is in new territory when the discount rate approaches 0 (or heck, goes negative!)

Re: Ask HN: Are we in tech-stock bubble?

#38

Post by msandford » Mon, Dec 28, 2020, 1:57 AM UTC

wtznc wrote: post #20

xenihn wrote: post #17

Earlier quoted context omitted.

>What this means is scarce financial assets are going to go up, and up, and up Until they don't...The exuberance I'm seeing lately scares the shit out of me. This is going to be a horrific crash when it comes.

Same feelings here...

I've been feeling that way for a decade at least. As someone once said, the market can remain foolishly optimistic longer than you can remain solvent (while shorting an over inflated stock).

Never underestimate the power of everyone doing crazy things to make them not crazy. Housing prices in the US have been crazy long enough that the whole system is bought in to these levels it seems. Of course reality could be different in a few weeks or months but the bubble in real estate has been going on for a significant fraction of my adult life.

Re: Ask HN: Are we in tech-stock bubble?

#39

Post by Gustomaximus » Mon, Dec 28, 2020, 1:58 AM UTC

thewarrior wrote: post #28

mancerayder wrote: post #25

No one ever answers a question like that to a satisfying degree. I made a bunch of money speculating on the swings of stocks. Not with options, just patience, and it enabled me to make wild returns. For example, I bought and sold Virgin Galactic 3 times over the past 13 or 14 months, which tripled my initial capital. I did similar but with a risky few pharma stocks. PLTR tripled since IPO (and unlike AirBNB it wasn't…

What portions of your returns are due to luck in your view ? Also you said you entered and exited virgin 13 times. How do you time your exits. Are you willing to reveal your strategies or algorithms?

> For example, I bought and sold Virgin Galactic 3 times over the past 13 or 14 months

Re: Ask HN: Are we in tech-stock bubble?

#40

Post by jungturk » Mon, Dec 28, 2020, 1:59 AM UTC

tonystubblebine wrote: post #2

TSLA? No idea. But I think there's often some hidden game going on with tech companies that go well beyond selling more sugar water and expanding overseas to places that haven't seen sugar water before. Amazon is the best at this... using one business to launch a second. So what I'd look for with TSLA is not whether cars can ever justify this price, but whether there is an adjacent business that is actually bigger th…

ARK put out a prospectus that details where they feel Tesla's revenue may come from. Scroll down a page or two and you'll see the tables they're using.

https://ark-invest.com/articles/analyst-research/tesla-price...