4 ms·

The unicorn phenomenon is the result of hot money looking for any kind of return in a zombified financial system. Tech has had a good run the last ten years bu

by sbardle 11y ago

The unicorn phenomenon is the result of hot money looking for any kind of return in a zombified financial system. Tech has had a good run the last ten years but things like QE have contributed to turning the sector into something of an asset bubble. But will it be allowed to burst? I'm not so sure. The central banks now have a vested interest in keeping these bubbles (whether in real estate or stocks) going for as long as possible. A few more rounds of QE and Twitter and LinkedIn might be back up in the clouds again.

nostrademons 11y ago
Tech is small potatoes in the global financial system, and the losers in a unicorn bubble burst are a small set of private investors. I doubt there will be any bailout for tech, nor will there be any major hangover like the dot-com bust. Rather, a few entrepreneurs and investors who made bad bets will exit the market, and their places will be taken by new entrepreneurs and investors who were more prudent. Capitalism at its finest. If we're predicting upcoming bailouts from this crash, I would bet on U.S. oil companies and everything big in China. China could potentially cause a massive earthquake in international trade. The student-loan bubble is also a massive debt overhang that could cause huge repercussions, but I don't see a trigger that would cause it to burst.
- sbardle 11y ago
  Tech is a big part of the US stock market (significantly bigger than it was before the financial crisis began). The question is: would the unicorn bubble bursting then contribute to a loss in faith in tech in general by investors, a NASDAQ collapse and a haircut for the likes of Apple and FB? We could well be on our way to QE to infinity and beyond. House prices in parts of the UK are 17 times salary now (against a historic average of 4 or 5), which all comes down to central bank policies over the last 20 years. The new (ab)normal might be here to stay, although I'd take a punt on alternative currencies in the meantime.
  - nostrademons 11y ago
    All unicorns together are worth less than Apple. https://www.cbinsights.com/blog/unicorn-companies-worth-less-than-apple/ https://www.cbinsights.com/blog/unicorn-companies-worth-less... [August 2015] (It's also less than Alphabet, given stock price movements since August. Take Uber and Xiaomi out of the unicorn list and the aggregate value of all unicorns combined is a little less than Microsoft.) The total value of unicorns, including Uber and Xiaomi, is roughly 10% of the NASDAQ 100. [per same link] The total value of the NASDAQ 100 is about 1/4 that of the S&P 500: http://marketcapitalizations.com/historical-data/total-market-cap-sp-500/ http://marketcapitalizations.com/historical-data/total-marke... Multiply them out and all unicorns together are worth about 2-3% of the S&P 500, or less than 1/4 of the decline since the beginning of the year. That's the typical fluctuation in value on a fairly active trading day.
  - gaius 11y ago
    These unicorns are not really tech companies tho'. What tech do they sell? They are ad companies or regulatory arbitrage plays, with an app and a website, that's all.
    - icebraining 11y ago
      Does it matter? They are generally considered tech companies by the public markets.
    - rhizome 11y ago
      It's the app and the website that make them tech companies.
      - gaius 11y ago
        Then every company is a tech company. You know Pizza Hut has an app now?
        rhizome 11y ago
        Did they develop it themselves, or did a tech company make it for them?
- danharaj 11y ago
  > and the losers in a unicorn bubble burst are a small set of private investors. i think this is correct but incomplete. in the modern global financial system there can be very long-range correlations between investors in both the short term and the long term. if those private investors' performance is highly coupled with the health of large financial institutions it could destabilize everything. when all the debt and credit in the world is structured and restructured into more and more complex financial products local risk can easily become systemic.
- eru 11y ago
  > The student-loan bubble is also a massive debt overhang that could cause huge repercussions, but I don't see a trigger that would cause it to burst. Especially, since people can't default on them. So the hangover will stay with us for as long as people who took student loans are alive. (Or perhaps even manage to pay them off.)
- astazangasta 11y ago
  >Tech is small potatoes in the global financial system I don't think this is how it works. The problem is there is too much speculative capital floating around; it creates bubbles anywhere some rich dudes smell opportunity. It does not have to be a jackpot; any hope of a fat percentage will bring the money around.

by sbardle 11y ago

nostrademons 11y ago

Tech is small potatoes in the global financial system, and the losers in a unicorn bubble burst are a small set of private investors. I doubt there will be any bailout for tech, nor will there be any major hangover like the dot-com bust. Rather, a few entrepreneurs and investors who made bad bets will exit the market, and their places will be taken by new entrepreneurs and investors who were more prudent. Capitalism at its finest. If we're predicting upcoming bailouts from this crash, I would bet on U.S. oil companies and everything big in China. China could potentially cause a massive earthquake in international trade. The student-loan bubble is also a massive debt overhang that could cause huge repercussions, but I don't see a trigger that would cause it to burst.

sbardle 11y ago
Tech is a big part of the US stock market (significantly bigger than it was before the financial crisis began). The question is: would the unicorn bubble bursting then contribute to a loss in faith in tech in general by investors, a NASDAQ collapse and a haircut for the likes of Apple and FB? We could well be on our way to QE to infinity and beyond. House prices in parts of the UK are 17 times salary now (against a historic average of 4 or 5), which all comes down to central bank policies over the last 20 years. The new (ab)normal might be here to stay, although I'd take a punt on alternative currencies in the meantime.
- nostrademons 11y ago
  All unicorns together are worth less than Apple. https://www.cbinsights.com/blog/unicorn-companies-worth-less-than-apple/ https://www.cbinsights.com/blog/unicorn-companies-worth-less... [August 2015] (It's also less than Alphabet, given stock price movements since August. Take Uber and Xiaomi out of the unicorn list and the aggregate value of all unicorns combined is a little less than Microsoft.) The total value of unicorns, including Uber and Xiaomi, is roughly 10% of the NASDAQ 100. [per same link] The total value of the NASDAQ 100 is about 1/4 that of the S&P 500: http://marketcapitalizations.com/historical-data/total-market-cap-sp-500/ http://marketcapitalizations.com/historical-data/total-marke... Multiply them out and all unicorns together are worth about 2-3% of the S&P 500, or less than 1/4 of the decline since the beginning of the year. That's the typical fluctuation in value on a fairly active trading day.
- gaius 11y ago
  These unicorns are not really tech companies tho'. What tech do they sell? They are ad companies or regulatory arbitrage plays, with an app and a website, that's all.
  - icebraining 11y ago
    Does it matter? They are generally considered tech companies by the public markets.
  - rhizome 11y ago
    It's the app and the website that make them tech companies.
    - gaius 11y ago
      Then every company is a tech company. You know Pizza Hut has an app now?
      - rhizome 11y ago
        Did they develop it themselves, or did a tech company make it for them?
danharaj 11y ago
> and the losers in a unicorn bubble burst are a small set of private investors. i think this is correct but incomplete. in the modern global financial system there can be very long-range correlations between investors in both the short term and the long term. if those private investors' performance is highly coupled with the health of large financial institutions it could destabilize everything. when all the debt and credit in the world is structured and restructured into more and more complex financial products local risk can easily become systemic.
eru 11y ago
> The student-loan bubble is also a massive debt overhang that could cause huge repercussions, but I don't see a trigger that would cause it to burst. Especially, since people can't default on them. So the hangover will stay with us for as long as people who took student loans are alive. (Or perhaps even manage to pay them off.)
astazangasta 11y ago
>Tech is small potatoes in the global financial system I don't think this is how it works. The problem is there is too much speculative capital floating around; it creates bubbles anywhere some rich dudes smell opportunity. It does not have to be a jackpot; any hope of a fat percentage will bring the money around.