Thank God. It has been so tiring listening to all the people playing the Greater Fool game of trying to get to an acquisition or IPO or SPAC. Maybe people can go back to build real actual useful products and services.
Tech bubbles are bursting all over the place
71–80 of 774 posts
Re: Tech bubbles are bursting all over the place
#72This is actually a good time to switch jobs because you'll be offered a compensation package with equity at relatively depressed prices.
Re: Tech bubbles are bursting all over the place
#73I work for non-tech generating 100million+ in revenue. Cushy job, fully remote, good pay and full autonomy with flexible hours working as an IC. I recently talked to a startup, similar pay, culture would be a better fit since it was mostly techies and I'm a nerd by nature.....but things just got awkward as soon as I asked about their revenue....they were bleeding money and I was told they were being acquired by a big…
Across every investment class there has been a trend of buyers needing to become more financially irresponsible in order to participate in the market. Need to buy a house? bid 20% more than asking, if you don't - someone else will.. in cash. Need to build a ride-hailing app? prepare to pay people to ride indefinitely. Need to own a growth stock? prepare to pay upwards of 100x multiple on revenue. All around, there ha…
...or housing will drop as interest rates go up. And a non insignificant number of folks were over extended in leverage.
I know too many folks who did 7/1 ARMs cash out refi to purchase another home in a 7/1 ARM loan, banking not on cashflow but appreciation.
I know of folks who bought homes using margin loans in their stock portfolio.
If housing stagnates, there will be margin calls, leading to supply shock, and price declines. Especially now that mortgage interest rates have nearly doubled year to date.
Re: Tech bubbles are bursting all over the place
#74"Then there are rising interest rates. Besides possibly triggering a downturn, they reduce the present value of tech companies’ profits, most of which lie far in the future."
This is key. If you have a 10 year horizon for your startup investments, hoping that one in 100 will become the next Amazon or Google, you're going to discount those future cashflows into todays dollars by applying an interest rate connected to current reality. If the base interest rates have skyrocketed, then the net present value of that future cashflow is way less. It's mentioned briefly in the article, but I wanted to unpack it here because it's a key reason that high inflation makes investment in startups far less attractive.
"It would be wrong to compare the current tech slump to the bursting of the dotcom bubble two decades ago. Back then companies had neither healthy balance-sheets nor promising business models."
I disagree with this. I'm not going to call out specific public companies, but there are many with no Price/Earnings to speak of because they are running at a massive loss. These companies are highly speculative investments and have yet to prove that they can turn a profit. It's not hard to generate revenue growth of 30% per year while running at a 20% loss. Creating a truly profitable company is hard, and much of the reason why these companies are listed on public markets is because early investors wanted to cash out by selling their stock to the public, rather than bear the risk of finding out whether the business can turn a profit.
Many of these never-been-profitable companies have eye-wateringly high valuations based on multiple of revenue. We've seen 10x to 25x revenue in the past few years, while losing money hand over fist and never having proven they can ever turn a profit and become self sustainable. Just like the dot-com era, these folks are world class at creating the right optics and making the right noises on quarterly investor calls. But at the end of the day, creating a business that makes more money than it spends is what it's all about, and that is very difficult to do. These never-profitable businesses have been benefiting from the era of free money, and as that time ends, so will they.
Re: Tech bubbles are bursting all over the place
#75This 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 is no way your slice of the company is worth that much. The stock market has been behaving like a pyramid scheme, where everyone assumed there will be more money entering than leaving any given stock.
Tech is a pretty egregious sector because of how many business models basically boil down to "we don't actually need to make money if we have a desirable stock". In the long run, I don't think we'll be worse off if the next generation of software companies actually focuses on making products people want to buy rather than play games with DAU and user acquisition and etc.
Re: Tech bubbles are bursting all over the place
#76I almost got offer from DoorDash, with obviously RSU as one of the compensation. Eventually didn't get the offer because they said I didn't pass leadership interview. Apparently I was interviewing at one level above I thought I was interviewing (the recruiter messed up). Anyway, I accepted an offer from a hedge fund, comparatively similar, but all cash. Now I feel that I am glad I accepted the hedge fund offer. I don…
Index funds. Check out the Bogleheads subreddit for a levelheaded investing approach.
Re: Tech bubbles are bursting all over the place
#77Tech? like technology? What does it mean? Because surely companies that apply scientific knowledge for practical purposes aren't 'bursting' all over the place, right? Does it refer to specifically these huge companies quoted on the article?
You know exactly what it means. There is no way that you think tech in this context means "applying scientific knowledge for practical purposes" unless you have - and I truly, deeply mean this with zero disrespect whatsoever - weapons-grade autism. When did it become the cool thing to pretend to not know anything about the context in which a particular discussion happens? It's maddening, but also completely exhaustin…
I see where your anger is coming from, but there were quite a few other words than "autism" that you could have used.
Re: Tech bubbles are bursting all over the place
#78I work for non-tech generating 100million+ in revenue. Cushy job, fully remote, good pay and full autonomy with flexible hours working as an IC. I recently talked to a startup, similar pay, culture would be a better fit since it was mostly techies and I'm a nerd by nature.....but things just got awkward as soon as I asked about their revenue....they were bleeding money and I was told they were being acquired by a big…
Across every investment class there has been a trend of buyers needing to become more financially irresponsible in order to participate in the market. Need to buy a house? bid 20% more than asking, if you don't - someone else will.. in cash. Need to build a ride-hailing app? prepare to pay people to ride indefinitely. Need to own a growth stock? prepare to pay upwards of 100x multiple on revenue. All around, there ha…
It's not irresponsible to bid 20% over asking. Asking is deliberately underpriced, because it is excellent advertising in a hot RE market.
It's irresponsible to bid 20% over what the house is worth (which has nothing to do with asking price), just because you got emotionally attached to the house, and started a bidding war with another person emotionally attached to the house.
Re: Tech bubbles are bursting all over the place
#79It'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…
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.
Re: Tech bubbles are bursting all over the place
#80Is this a good time to start buying as everyone is selling/panicking?