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U.S. tech stocks are now worth more than the entire European stock market

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Re: U.S. tech stocks are now worth more than the entire European stock market

#71
post #4

The growth in tech stocks has been pretty insane imo. It's so easy to be afraid though and call this another 2000, but we really don't know what the future holds. I wish Europe had it's own set of exciting tech companies. That would be amazing. As a human living on this planet, the more things available to me, the better. Unfortunately, Europe doesn't seem to do much anymore. Google "European growth stocks". I want t…

The "growth" in tech has been entirely driven by monetary policy. Google or Facebook or Apple or Netflix or Amazon have done nothing special than what they've been doing for the last 5 years. I wish we were getting insane tech out of this bull run but the truth is there's no "innovation" behind it and their paper is just being used as a shield by investors which is why their stocks keep going up.

EU is a great counterexample to show that you can have crappy monetary policy without _any_ growth.

USDEUR stayed the same (both inflated together), but there are no new tech companies in the EU to show for.

Re: U.S. tech stocks are now worth more than the entire European stock market

#72

"Pour water into your wine to create more wine" sort of scenario. Why nobody is talking about the USD being diluted and the inflation effects are embodied in virtual equity valuations?

Because most investors don't believe that the USD is being significantly diluted? I know the idea that inflation is just around the corner is big here on HN, but it's not a big concern on financial markets. The inflation implied by TIPS is only 2% (the Fed target). The value of the dollar is down maybe 10% from last year.

> The value of the dollar is down maybe 10% from last year.

Which makes USA tech companies even more valuable as they do a significant amount of business overseas. They report in USD and converting those Euros, etc into USD means more USD. All the while not having to pay more for imported materials, etc.

Re: U.S. tech stocks are now worth more than the entire European stock market

#73

Earlier quoted context omitted.

Also, we have an annoying amount of red tape from both the UK itself and, at least for the immediate future, the EU. It gets in the way of starting a business, but worse, it gets in the way of taking significant steps necessary to grow a new business like taking on your first employees. If you've got months or years of runway from external funding, that's irritating but not a big deal. You hire someone to deal with i…

Whenever this argument comes up I feel like I'm missing something. which typical European regulations get in the way of bootstrapping startups?

I wouldn't make the argument that regulations get in the way without specifying which one. I would make the argument that, philosophically, Europe is very conservative and risk averse in terms of terms of releasing funding. For the purposes, of this argument, I'd also ignore states and political unions. However, you segment Europe, the result tends to be same.

This is at all levels of banking and financing. In the US, the balance is very different for almost all types of business. Of course, you can find exceptions, but investors will engage without the level of due diligence, or qualification, that is required in Europe.

There are various papers like Assessing the Potential for EU Investment in Venture Capital and Other Risk Capital Fund of Funds (https://ec.europa.eu/newsroom/horizon2020/document.cfm?doc_i...) which cover some of the issues.

Re: U.S. tech stocks are now worth more than the entire European stock market

#74

It is worth understanding that the European stock market, bar the UK and possibly Sweden, isn't like the US. Most companies finance themselves through banks. Whilst Europe as an economic unit is larger than the US, capital markets are still basically non-existent (bar the efforts of the ECB to throw cash at anyone who raises money from capital markets). Also, the rise of tech stocks is significant not only relative t…

Yeah, a lot of people don't realize how market cap weighted actually gets you a not very diversified portfolio. For example, if you hold the S&P 500, about 8% of that is Apple, 6% is Amazon, 6% Microsoft, and 4% Google.

So 25% of your capital is going to 4 names, all in the same sector. Meanwhile, the smallest holdings will be under 1%.

Though market cap weighted is good for avoiding trading fees (you don't have to rebalance when the price of a stock changes), it's bad for investors. Not only do you miss out on some diversification, you end up with undue exposure to only a few sectors and you miss out on Fama and French's size factor by only investing in large companies.

Re: U.S. tech stocks are now worth more than the entire European stock market

#75
post #18

Earlier quoted context omitted.

The "growth" in tech has been entirely driven by monetary policy. Entirely? Google revenue in 2014 ($66B) to 2019 ($161B) is 143% growth over 5 years. No doubt monetary policy has an effect, but tech companies have grown substantially over that time as well.

And Microsoft multiplied their profits a few times between 2000 and 2010 while their stock dropped 75%. Valuations are important. Valuations are affected by the monetary policy/liquidity cycle. And Google's valuation is growing faster than any rational measure of economic value.

No, it dropped 75% in 2000 due to the dot-com bubble. If you started in 2001 you actually had a 60% gain by 2010.

Re: U.S. tech stocks are now worth more than the entire European stock market

#76

Earlier quoted context omitted.

Also, we have an annoying amount of red tape from both the UK itself and, at least for the immediate future, the EU. It gets in the way of starting a business, but worse, it gets in the way of taking significant steps necessary to grow a new business like taking on your first employees. If you've got months or years of runway from external funding, that's irritating but not a big deal. You hire someone to deal with i…

I don’t know where you got that idea from, the UK is one of the easiest places to start a business.

Starting a business is easy. I've personally done it in the early 2000s, and it's easier today. However, it's structured for traditional businesses which produce returns relatively early.

It is not structured to support "startup"-type companies like those in the US. Yes, Silicon Valley is the focus on HN, but the range of options beyond what you find in the UK is available in many more places than just SV.

In the UK and Europe you can potentially find an angel investor. Once you go to the next levels of finance then it gets tougher. In the US, you have access to the next level of VC finance which comes from a relatively large pool. Most financiers in Europe tend to be conservative, although there are efforts to change that. Hence, companies flipping to being US-based.

Re: U.S. tech stocks are now worth more than the entire European stock market

#77

Earlier quoted context omitted.

Also, we have an annoying amount of red tape from both the UK itself and, at least for the immediate future, the EU. It gets in the way of starting a business, but worse, it gets in the way of taking significant steps necessary to grow a new business like taking on your first employees. If you've got months or years of runway from external funding, that's irritating but not a big deal. You hire someone to deal with i…

I don’t know where you got that idea from, the UK is one of the easiest places to start a business.

Starting a business here is easy.

Growing a business here is harder.

You want an office? Welcome to the wonderful world of business rates, commercial lettings, site security, ever-changing transportation and infrastructure arrangements that will be largely out of your control, etc.

Hiring your first employee? Welcome to employment contracts, documenting policies for things like grievances and disciplinary actions that you hope you'll never need, arranging pension plans, H&S regulations, statutory leave, benefits rules, and all the other HR fun and games.

Providing a service online, where your customers might come from abroad? Welcome to international tax regulations that you can barely keep up with, never mind properly comply.

Don't want to have users steal back all the revenue you ever took from them based on a legal technicality? Better have a good lawyer to write all your documents.

Don't want an intervention by the data protection regulator? Better make sure all your GDPR compliance processes and documentation are up to standard.

Remember to file your real-time payroll data and VAT returns and confirmation statements and annual financials on time. Don't forget you'll need to use suitable online systems for a lot of this stuff now, since HMRC insist on it, and you'll need to get anything else you're using for financial management integrated with them.

Don't forget your public liability insurance. And employer's liability insurance. And professional indemnity insurance. And property insurance. And...

Now, you can outsource a lot of this work. For some legal and accounting matters, you will have little choice, unless that happens to be your field of expertise. But of course the services offering to do it for you will charge you, and even if it's just a thousand pounds here or 3% of your revenue there, it will soon add up. Until you're big enough to have in-house people for things like HR, facilities management, IT, legal and financial, that's how it goes.

Now, run along and make sure your designated H&S officer has checked that all your employees currently working from home have suitably ergonomic workspaces set up, recent sight tests done and glasses/contacts provided if they're working with computers, and proper reporting in place for all the extra expenses they'll be claiming due to the sudden home-working this year, because you could be on the hook for a big bill if you get any of that wrong.

Re: U.S. tech stocks are now worth more than the entire European stock market

#78

Earlier quoted context omitted.

It's still miles away from what's done in the US/China. Like, the whole TikTok thing is being ridiculous, in my point of view. For example, strategic assets for the EU are airlines, or automotive industry, it's where you've seen government intervention. But I'm not saying it's a good thing! In my country China bought the only Energy company we had - how isn't this considered a strategic asset? Sometimes I think EU is…

Well the US only got cozy with big tech after it got big, not actually that different than EU policies you mention being around only existing big industries like automotive. Only China has taken active steps in fostering those companies from nothing.

Big tech has been around for a long time it’s Big Tech FANG that’s new. Apple and Microsoft are not new companies. IBM is old school big tech that’s been cozy with the US Govt for a very long time. Fairchild was big with the government before they produced their first silicon integrated circuit.

Re: U.S. tech stocks are now worth more than the entire European stock market

#79

Earlier quoted context omitted.

> The "growth" in tech has been entirely driven by monetary policy. For the uninformed, what monetary policy exactly is driving this growth?

"Quantitative easing". One way to juice the economy is just print more money and give it to everyone. Everyone's richer, yay! Except you haven't increased production or necessarily consumption, so prices will just equalize to the new money supply and you get consumer price inflation. For QE, we got smarter, and just gave all of the money to the bankers, because that's what all the economic experts who work at banks s…

Got it. I suppose this explains why there wasn’t an increase in the price of consumer goods following the billions of COVID relief pumped into the economy. Correct?

Re: U.S. tech stocks are now worth more than the entire European stock market

#80
post #4

The growth in tech stocks has been pretty insane imo. It's so easy to be afraid though and call this another 2000, but we really don't know what the future holds. I wish Europe had it's own set of exciting tech companies. That would be amazing. As a human living on this planet, the more things available to me, the better. Unfortunately, Europe doesn't seem to do much anymore. Google "European growth stocks". I want t…

The "growth" in tech has been entirely driven by monetary policy. Google or Facebook or Apple or Netflix or Amazon have done nothing special than what they've been doing for the last 5 years. I wish we were getting insane tech out of this bull run but the truth is there's no "innovation" behind it and their paper is just being used as a shield by investors which is why their stocks keep going up.

Monetary policy and the fact that the big tech companies (and a lot of the smaller more "boring" ones) have almost universally resisted the effects of C19. A large part of the world being asked stay indoors means more spending on home entertainment (Netfix), more free time to melt your mind with social media (Facebook), more ad impressions (Google), more online shopping (Amazon), businesses needing a robust WFH infrastructure (Microsoft, Zoom).

This is all while "traditional" businesses have had governments shut them down or tell their customers to stay at home.

If you were an investor paying attention over the last 6 months you would be selling everything else and buying tech.

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