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41,000,006 reasons why I think we're in a bubble

jacquesmattheij.com

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Re: 41,000,006 reasons why I think we're in a bubble

#161

Post by ErrantX »

runevault wrote: post #160
ErrantX wrote: post #158

Earlier quoted context omitted.

It depends which industry you pick - but often the problems are over-hyped. It's true; I had the same trepidation you talk about when first having to face doing sales... and at the start it can be a disaster ;) but you can soon pick up the tips & tricks needed to sell to corporates. In fact; as hackers we are actually at an advantage selling to corporates, so long as you "get" the process, because they tend to be "at…

I may well be somewhat jaded because my job is coding for the financial side of things. When you're dealing with money and banks things... suck. A lot.

That would be it then :P Finance is very very definitely in the category of "industries not to pick" in my experience.

Re: 41,000,006 reasons why I think we're in a bubble

#162

Post by trotsky »

cynicalkane wrote: post #152
trotsky wrote: post #116

Earlier quoted context omitted.

There are a quite a number of ways to measure inflation, the fed's version of it is quite narrow. If you look at wholesale commodities there has been a dramatic increase over the past year. Here is an interesting article that appeared in the WSJ opinion section a few weeks ago. I found it to be quite insightful, and it presents a workable explanation about why we might currently be causing inflation and not wanting t…

The fed's version is the PCE/PI, which is the most general measure of inflation that is theoretically possible. You might have that confused with the CPI, which is a different index, the one you usually see in the news. Finance is pretty easy to understand, relatively speaking, but the signal-to-noise ratio is far too high. The average finance news site tends to be a wretched hive of investment advice nuts and unreli…

Bernanke has regularly referred to "Core Inflation" when discussing inflationary pressures. You can see his use of it as recently as Feb 3, 2011 in his speech to the National Press Club: http://www.federalreserve.gov/newsevents/speech/bernanke2011...

The Fed's version of core inflation is the core PCE price index as you stated. The "core PCE price index [...] excludes the more volatile and seasonal food and energy prices" [1].

While you may reasonably take issue with my wording of "quite narrow" as I perhaps wasn't choosing my words carefully enough, core inflation/core PCE certainly isn't "the most general measure of inflation that is theoretically possible". I assume you weren't meaning to refer to "core PCE" - but never the less it is clear from federal reserve speeches that it is this measure that has been playing significantly into federal reserve monetary policy.

Core inflation makes sense in trying to smooth out seasonal or short term moves. However, the effects on global food and oil commodities that are traded in US dollars seem to far exceed any seasonal or short term influences. In that case discounting food and fuel influence on actual inflation rates seems unwise.

Bernanke seems to be acknowledging this. The WSJ reported on the 13th of March in an article titled "To Avert Criticism, Fed Avoids Saying 'Core'": Now, Mr. Bernanke is taking another tack in his public communications. In two days of testimony on Capitol Hill earlier this month, the Fed chairman never uttered the words "core inflation" while explaining the central bank's aims and policies. [2].

As a side note, as I've noted I'm in no way trying to put myself forward as an expert on these subjects. I get a significant amount of my financial news and analysis from the WSJ and Marketplace (public radio) (and Morgan coverage, which admittedly is not particularly hawkish here). I'm not above admitting that I could be making some serious mistakes, so if you'd like to suggest better sources of information I am all ears.

[1] https://secure.wikimedia.org/wikipedia/en/wiki/Personal_cons...

[2] http://online.wsj.com/article/SB1000142405274870489360457619...

Re: 41,000,006 reasons why I think we're in a bubble

#163

Post by cpeterso »

danenania wrote: post #122
wat55 wrote: post #101

Earlier quoted context omitted.

This is completely wrong and absurd. We've had a gradual inflation rate since the beginning of the U.S. Dollar. We were headed toward a deflation without the QEs, which would've been a disaster in a highly illiquid economy. The QEs simply brought the inflation back to a good, gradual rate, and put more liquidity into the economy so businesses can start hiring again.

"We were headed toward a deflation without the QEs, which would've been a disaster in a highly illiquid economy." Right, this according to the brilliant minds who created the crisis in the first place. Clearly the financial situation is bad. Your 'good, gradual inflation rate' is WHY we're on the precipice of disaster. It's not like we now have a choice between an economic meltdown and a land full of unicorns and rai…

"Good, gradual inflation" is how The Man keeps the proletariat busy working. They can't afford to stop.

Re: 41,000,006 reasons why I think we're in a bubble

#165

Post by notahacker »

bhousel wrote: post #123
notahacker wrote: post #120

Earlier quoted context omitted.

I'd say it's the opposite, it's made them very expensive to acquire. It's not inconceivable that with the right team and a very impressive tech demo Facebook might have been prepared to sink >$41 million into a strategic aqui-hire at a very early stage. Now to give the VCs a return on their investment they're probably expected to exit at north of a billion, which means they're going to have to show Facebook something…

You don't think the investors would be happy with $400MM in pre-ipo Facebook shares?

I'm not sure Facebook's investors would be happy with $400MM in pre-IPO shares, except in the unlikely event the service is generating significant revenue per user or bigger than all their location-based competitors before Facebook IPOs. I believe that's double Y Combinator's biggest exit, so it's not as if you can't pick up great hackers with great products and actual revenues for a lot less, and with pre-profit location-based startups being not-exactly-unfashionable at the moment Facebook are spoilt for choice if they want to make strategic acquisitions in that space.

I think Color have committed themselves to trying to build something big enough to be considered a Facebook alternative. Taking $41 million in a Series A buys you a lot of premature optimisation or a lot of runway if you don't think you're going to get a better valuation in a series B round. It also more or less rules out the quick exit.

Re: 41,000,006 reasons why I think we're in a bubble

#166

Post by Tycho »

The previous bubble took 5 years to form and about 2 months to go 'pop'. I'm not sure if that timetable is trustworthy, but we definitely seem to be accelerating along the curve.

Just thinking aloud here, but how on earth would you make a trustworthy timetable out of that observation? What do you measure? Economy was size A in year Y2K, technological faciliation was a level B, there were C people involved directly with the market; now the economy is size X, tech is level Y, and Z people are at the table... like why would you think one previous bubble was in some way proportional to a present one?

One last thing, what to make of Max Andreeson's pet theory that there never was a real dotcom 'bubble' - that a few companies were ridiculously overvalued but overall most were ok and in fact more investment should have happened (in a more diversified manner)?

Re: 41,000,006 reasons why I think we're in a bubble

#167

Post by Tyrannosaurs »

goatforce5 wrote: post #110
Tyrannosaurs wrote: post #98

Earlier quoted context omitted.

I recall that being the justification for a lot of VC stuff around 1999/2000.

But what's the answer? Regulate the size of investments in early stage companies? Point and laugh at seemingly crazy valuations? Ignore the market and concentrate on building our own things?

No, people can invest what they like and I'm sure that some of the investments that look stupid work out at least OK.

My point was more that you can't just assume that because smart people think X, X is true. I think this is especially true in the world on VC investment where the investors don't believe that every bet they make will come off - what they're looking for is enough of them to work out that they make a profit overall rather than that every single one nets them a return.

For the rest of us we can point and laugh for the most part because, hey, that's fun, and by coming on here and running our mouths we, in our own small way, bet in the investors do (though we gain or lose tiny bits of our reputation rather than cash). But we might also want it to inform our decisions when it comes to investments and choosing our next job.

Re: 41,000,006 reasons why I think we're in a bubble

#168

Post by phillmv »

grellas wrote: post #134

I guess it is a matter of terminology but I have to disagree on this one. A bubble is all-pervasive and extreme. It represents a systematic investment mania where everything becomes surreal. People sell vast tracts of land for a prized tulip. Junk companies with nothing to offer but a vague concept about revolutionizing how this or that will be done owing to some new phenomenon such as the internet make serial stock…

Sure, whatever. I think we're splitting hairs.

I think the overall point is that what we're currently engaged in isn't sustainable and the contraction is going to be painful when it hits in 6 months to a year once all the cheap money[0] dries up. There's a bubble within our asset class.

My question is: how does one short this phenomena?

[0] http://news.ycombinator.com/item?id=2363903

Re: 41,000,006 reasons why I think we're in a bubble

#169

Post by klochner »

bhousel wrote: post #80
toddmorey wrote: post #70

As someone else commented, Facebook could easily add a feature to show pictures from friends geotagged with your current location. (Not a perfect replacement but a lot of the magic.) Apple also appears to be getting aggressive in this space with the new version of mobile me. Color has an interesting vision, but I think traction as a photo sharing add-on is going to be tough once the social network and the mobile devi…

What is far more likely is for Color to try to get themselves acquired by Facebook. If this is their real company strategy, the $41M investment actually makes sense.

That's pure bubble talk - "we don't have to generate profit to justify the investment, we'll just get acquired by someone else"

SOMEONE has to generate a profit based on the technology which justifies the investment or acquisition cost, whether it's color or their eventual acquirer.

Re: 41,000,006 reasons why I think we're in a bubble

#170

Post by fedd »

scrrr wrote: post #2

Well, I am not in a bubble. If anything my software is vastly undervalued. I wouldn't know what to do with 40M. I could use 100k though..

same thing here except i would know what to do with 40M: use the software we're writing to launch the consumer-facing location-social google killer armed with AI! (buy servers and bandwidth etc)

isn't it strange? well, as a software devs we seem to have longer and harder path to breakeven.

but consumer startups seem need even more money to serve millions of customers, and the success chances seem a little higher than that of a lottery, as you should predict and check if the inconstant masses would like the app or not.

why we're not in a bubble then?

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