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Tech bubbles are bursting all over the place

economist.com

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Re: Tech bubbles are bursting all over the place

#551

Post by Animats »

legitster wrote: post #75

This has been a long time coming. Back in the day, there was an inherent understanding that a stock price is supposed to reflect "the fundamentals" - present value of the company + future earnings. And of course there was some amount of speculation around future earnings, but for the most part companies at least tried to be profitable. But if you look at the share price of like, Tesla - it's completely insane. There…

Back in the day, there was an inherent understanding that a stock price is supposed to reflect "the fundamentals" - present value of the company + future earnings. And of course there was some amount of speculation around future earnings, but for the most part companies at least tried to be profitable.

Yes. And after each crash, people have to re-learn that.

Re: Tech bubbles are bursting all over the place

#552

Post by etimberg »

Closi wrote: post #255
legitster wrote: post #205

Earlier quoted context omitted.

I'm not sure where you are getting those numbers from. Ford had $37b in revenue Q4. Tesla had $16b. Tesla is an impressive company that's managed to finally be profitable. But currently their market cap is higher than all other auto manufacturers combined. > Everyone else is losing money on their EVs and can't make them in volume production, can't find the batteries for them, you do the math. That's the thing, this s…

> I'm not sure where you are getting those numbers from. Ford had $37b in revenue Q4. Tesla had $16b. Tesla makes a 27.4% gross margin on that revenue though, while Ford has a gross margin of 4.8%. > Tesla is an impressive company that's managed to finally be profitable. Although technically true, this is a little misleading as it implies that Tesla is barely profitable - in reality they have moved from 'finally beco…

Tesla as a product is a status symbol though. It's naturally going to be a high margin product but the cost means that the market is smaller. For example, the cheapest Tesla currently sells for $61,980 before tax in Canada. The number of people who can drop $62,000 on a car are a lot fewer than those than can spend $30,000.

Re: Tech bubbles are bursting all over the place

#553

Post by cableshaft »

formerkrogemp wrote: post #374
ripe wrote: post #171

Earlier quoted context omitted.

> non-productive Speculative investments tend to get punished at the end of the cycle by losing all value, thus punishing those invested in it and restoring order. To be precise, the investors who are left holding at the end of the cycle get punished. The early investors who got out make out like robbers. This system incentivizes pump-and-dump.

We don't need solar, wind, nuclear, hydro, water reclamation, on shore chip foundries, manufacturing, battery chargers, non-crumbling bridges, manufacturing, paved raids, public transit, or working airports. We need more crud apps and adtech! More stock options and stock buybacks!

You're being sarcastic, but we probably don't need that stuff either. We're eventually going to run out of resources to make all that at some point (we're already starting to run out of sand[1], which we use in modern cement, for glass, and for the silicon in computer chips, for an example -- and before anyone goes 'deserts are full of sand!' they are, but it's the wrong type to make these things).

Probably should start putting some energy into getting ready for pre-industrial age living again.

[1]: https://www.bbc.com/future/article/20191108-why-the-world-is...

Re: Tech bubbles are bursting all over the place

#554

Post by throwaway14356 »

Animats wrote: post #551
legitster wrote: post #75

This has been a long time coming. Back in the day, there was an inherent understanding that a stock price is supposed to reflect "the fundamentals" - present value of the company + future earnings. And of course there was some amount of speculation around future earnings, but for the most part companies at least tried to be profitable. But if you look at the share price of like, Tesla - it's completely insane. There…

Back in the day, there was an inherent understanding that a stock price is supposed to reflect "the fundamentals" - present value of the company + future earnings. And of course there was some amount of speculation around future earnings, but for the most part companies at least tried to be profitable. Yes. And after each crash, people have to re-learn that.

to the moon and back

Re: Tech bubbles are bursting all over the place

#555

Post by adam_arthur »

paulpauper wrote: post #393
vishnugupta wrote: post #58

It's fascinating to trace the genesis of present crash to Fed's policies post 2008 crisis. The interest rates were kept artificially low to prevent another Great Depression. 2010s saw an unprecedented rally of tech/growth stocks, fuelled by cheap capital. Growth at all cost was the mantra, hoping companies will turn profitable at some point á la Amazon. Uber's CEO hit the nail on the head when he wrote "The average e…

2010s saw an unprecedented rally of tech/growth stocks, fueled by cheap capital. Correlation does not mean causation, as it's commonly said. Interest rates were high in the 80s and 90s yet tech stocks boomed. Tech stocks did so well because they make so much money. Facebook earned $40 billion in profits for 2021, 3x Walmart. Google makes even more. Also, market dominance and moat factors working to big tech's favor.

Which tech stock was valued at 100x sales in the 80s? I'm sure there are plenty of examples from 1999, though.

Re: Tech bubbles are bursting all over the place

#556

Post by adam_arthur »

shakezula wrote: post #524
juanjmanfredi wrote: post #79

Earlier quoted context omitted.

Inflation metrics show that the economy post 2008 was in fact under stimulated, which is why the recovery from the financial crisis was so slow. The recent COVID-related stimuli are what went too far.

I don’t know if I disagree but we were also in a really bad position if we didn’t do it. The stimulus did a lot of good, I saw the first hand benefits of what it did for people who really needed it.

False dichotomy. It should have been done, but to a much lesser magnitude. That is plainly obvious to any rational minded person.

The Fed also should have considered velocity in employment gains. They basically waited until labor market was already overheated to do anything... which means many are likely to lose their jobs in the fight with inflation now.

Unfortunately the basic law of economics and real productivity vs nominal currency units has continued to exist, despite it being 2022.

Re: Tech bubbles are bursting all over the place

#557

Post by adam_arthur »

BobbyJo wrote: post #426
adam_arthur wrote: post #405

Earlier quoted context omitted.

It's not about revenue, it's about valuation. The revenue can be whatever you want, the valuation determines long run returns. Tesla could be priced at 20x PE or 100x PE and be the same company. Your returns will be vastly different between the two scenarios. OPs point, which is pretty obviously objectively true, is that valuations far exceeded future yields by any fundamental valuation metric. Tech has been valued a…

I mostly agree, I just feel the need that valuation metrics rely on past values, which aren't as useful depending on the company you're talking about. If a company has net income X, but a new high margin product launching next month that could easily double or triple that, their P/E will look ridiculous but , in fact, be quite reasonable.

The reason to use past values is because they're known. Anything anticipating the future is speculation, and relies on many assumptions. Check analyst earnings estimates for S&P companies for 2008 and you may be surprised what you find.

I fully believe Tesla can be the number one auto maker, and get self driving working to a sufficient extent to be marketable. But what's the upside? A few X at most. To me that risk/reward is pretty awful... many more attractive companies selling at 1x PS and fast growth/smaller market cap that can go up 10x easily over a few years

Re: Tech bubbles are bursting all over the place

#558

Post by astrange »

JaimeThompson wrote: post #442
gonzo41 wrote: post #92

Earlier quoted context omitted.

This is also a central banking fail in so far that there's that much liquidity in the market that can't find a productive outlet. There's a lot of money, but also not enough concentrated in one spot to do really useful ventures like large infrastructure projects. So instead the money is distorting everything. Imagine if lending was less cheap for home owners but it was still cheap for governments or really large comp…

>really large companies to be able to build train lines or advanced manufacturing They would use the money to buy back their own stock.

Stock buybacks aren’t spending money any more than putting it in your retirement fund is. They are value neutral.

Re: Tech bubbles are bursting all over the place

#559

Post by sokoloff »

bityard wrote: post #482
dangrossman wrote: post #348

Earlier quoted context omitted.

The DMV in my state requires you make an appointment 4-6 months out right now. Walk-in appointments are unavailable or only available during a few hours a few days a week, if they happen to have staff that day. Good luck if you have your drivers license stolen. I sold a car of mine to Carvana in October. I returned the license plate to the DMV immediately, which is how they're notified that you no longer own the vehi…

Please don't still your car to carvana. They are destroying private party used car sales in many communities around the country.

If they’re paying the highest price (and have the greatest convenience) to buy an asset I’m selling, they’re going to be the proud new owner. Same story if Blackrock wants to bid the most on my house.

If they have a better mousetrap, good for them. If they don’t and are just overpaying for cars, well, good for me.

Re: Tech bubbles are bursting all over the place

#560

Post by imtringued »

jokethrowaway wrote: post #529
kurthr wrote: post #196

Earlier quoted context omitted.

That is "the market" working for you! We could allocate resources to productive assets by fiscal spending, but that is prevented by politics. Only when "the market" gets its cut can any infrastructure be built in the US. That's also true for much of the medical establishment and pension/retirement systems. If the market was efficient, we wouldn't be complaining about it. Unfortunately, a "free market" and an efficien…

But we don't have a free market. The government has heavy handed regulations distorting the market and spent the last years creating money out of thin air and killing small businesses. The government propping the market up during the pandemic kept alive the myth that the market is always growing but also caused a terrible inflation. Now that the market is going back to reality the government can't just print more mon…

You are ignoring capitalists that abuse the government to distort the market in their favour.
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