7 ms·

I think most tech stocks are overpriced right now. The amount of speculation taking place in the stock market at the moment is just insane. MSFT gained 30% over

I think most tech stocks are overpriced right now. The amount of speculation taking place in the stock market at the moment is just insane. MSFT gained 30% over 6 months (that's compared to pre COVID levels), what's changed that much? Microsoft is a mature company, it shouldn't swing this hard. Nvidia almost doubled compared to pre COVID levels. ???

qeternity 6y ago
The Fed.
jjoonathan 6y ago
> what's changed Passive cash flows became more expensive. Money got pushed into Microsoft, not pulled into it.
- enilakla 6y ago
  Exactly
- rsp1984 6y ago
  Mind explaining what you mean by "passive cash flows" and why they became more expensive?
  - Spivak 6y ago
    MS didn’t become more valuable in a vacuum. It’s just with the pandemic hurting so many businesses the value of a stable mature company that’s still making money went up.
    - take_a_breath 6y ago
      The price/earnings ratio went up. You are paying more for each dollar of MS profit compared to last year (which was already a high P/E ratio). It’s another form of inflation.
  - misja111 6y ago
    Passive cash is cash that is invested relatively risk free, such as in A status government bonds. 10Y treasury rate dropped by 1 percent point this year: https://ycharts.com/indicators/10_year_treasury_rate https://ycharts.com/indicators/10_year_treasury_rate
enilakla 6y ago
Pretty much - Large and Mega cap is performing well because at the end of the day it’s small businesses that will struggle while the larger entities can ride it out. Add a few trillion in cash and the writings on the wall. I also suspect the decision makers don’t really want asset prices to go to shit, so better for them to issue more debt and let the next generation deal with it.
nabla9 6y ago
SP 500 Equal Weight Index is down -11.63% YTD. (every company in SP500 EWI has the same weight). Most companies in SP500 are down. Stocks hurt because of COVID are losing value, those who are not affected or benefit gain. High prices in tech sector reduces their expected future ROI. That's completely acceptable because other investments are worse.
- vmception 6y ago
  and the universe of good investments is small while the universe of the money supply has expanded so we will so oversized capital misallocation, until it is not considered a misallocation anymore comparative metrics of the individual companies just because they happen to be publicly traded shares is not relevant or holistic enough
  - sdenton4 6y ago
    Funny how when redistribution of wealth is mentioned everybody gets all "oh noes, inflation! if poor people can eat then the food will cost too much." But this is kinda what we're seeing on the stock side... there's too much wealth aggregated in the hands of people who already have enough [food, shelter, education, etc] chasing a small world of actually-not-so-great-right-now investments. The fundamental problem of capitalism is that it only solves the problems of people with money. Put the money in the hands of people with more problems, and those problems will get solved. (On the 'oh noes, inflation' side, many of these problems can be solved by services, which create their own supply over time as people take the new jobs created by new demand.) As it is, a massive amount of wealth is tied up doing nothing but looking dumb...
    - seamyb88 6y ago
      I upvoted you. You get lots of people on here who are systems engineers, or love solving complicated problems. But when it comes to wealth inequality, it's just a fundamental law of nature that cannot be changed. In reality, it can be solved with a pie chart. They want a taste of the high life. Sucked in by the apprentice and high fructose.
rsp1984 6y ago
Post COVID the world economy is no longer growing, so stocks of companies that do grow are at a premium now.
- levesque 6y ago
  That makes a lot of sense.
- luspr 6y ago
  I think prices today are to some extend inflated by government action. But it is hard to tell by how much, since also the global economy will grow again very soon. And if anyone benefits from more digitization and remote work it is MSFT. Also for MSFT specifically, I think the company is in a very good spot right now with its cloud business, gaming and office, developer and productivity software
  - nogabebop23 6y ago
    I suspect MSFT is reaping a huge gain from the combination of business tooling (office, applicaitons, infrastructure), cloud-hosted environments and high-touch customer management. With all those workers remote, companies have huge IT workloads to support them. Would you rather be calling your MS rep these days or trying to find a human at Google?
    - victords 6y ago
      Let's not forget about the Xbox gamers working from home that are secretly playing games during boring meetings.
rwmj 6y ago
Right. Intel stock is still somewhere around double what it was only 3 years ago, and I'm pretty sure that they're not in a better situation re EUV, 10nm, competition from AMD etc. than 3 years ago.
melvinroest 6y ago
In the book The Intelligent Investor I got a feel for how long optimistic views can last (TL;DR 5+ years). And then 2000 - 2003 happened.
yangminded 6y ago
The public noticed the value of technologies MSFT offers. Not everyone who has money and invests understands what Cloud is or why MS Teams is something that might sell well. Covid-19 gave all those people a very visual example of the value proposition.
Ecstatify 6y ago
Microsoft are killing it in enterprise. Our company is moving hundreds of servers to the cloud (Azure). Our company owns it's own datacenter, has a strategic partnership with another cloud provider (CEO supports the cloud provider publicly) but we're still moving to Azure. Since the start of the pandemic we have thousands of users moving from Skype for Business(on premise) to Microsoft Teams(subscription). Microsoft Teams has more users than Slack now. Once you're on the Microsoft train it's hard to get off. New Xbox coming out I believe at the end of the year. I think companies that don't have the necessary skills(my company) need to move to cloud our they will die, our core business isn't maintaining servers. Microsoft have really turned it around with developers, embraced open source, built great developer tools.
- sithlord 6y ago
  to be fair, teams has more users than slack because they effectively give away teams with o365, and then claim all the people who have o365 use teams. Lots of companies use o365 (so get counted for teams) then, use slack as there actual chat app. With that said, our company recently switched from slack to teams, and its been a fairly annoying change. Teams is miles behind slack in terms of usability.
  - deleted 6y ago
    [deleted]
  - Ecstatify 6y ago
    Yeah slack is definitely the superior product, I think it was a great strategy by Microsoft to give the free 1 year subscription. Gives them some time to catch up to slack.
    - deleted 6y ago
      [deleted]
  - kwww 6y ago
    Since coronavirus Microsoft has the NHS (~1.7M employees) on teams.
csomar 6y ago
The market had a chance to correct itself; or worse, get into a depression (bear market). But that didn't happen. It suggests two things: 1- Either the market is not over-priced and these companies have strong revenues and fundamentals; or 2- The US dollar is discretely hyper-inflating and it's showing only on stocks and other similar assets at the moment. Sure there is a chance that we are in a bubble (by the way, we have been saying that since 2010. That's over 10 years) but after Covid, I think that fundamentals have changed.
- Wohlf 6y ago
  I think there's just nothing better to invest in right now, and wealthy people have a lot of capital. With things how they are in Hong Kong maybe there's even more capital flight out of China because they see the writing on the wall.
  - bobsoap 6y ago
    > I think there's just nothing better to invest in right now I think this might be the biggest reason. With B&M falling like flies left and right, people are shifting their investments. I don't think it's limited to "wealthy people" either. I'm sure the Fed's buying spree/inflation is a factor as well, however. Interesting times.
  - albertop 6y ago
    Agreed. I think this is still the case of: “Bears swimming in liquidity”
MobileVet 6y ago
I have been spending quite a bit of time trying to understand how the market is doing so well. There are quite a few variables, as in most complex systems, and many have been outlined Robinhood etc here. However, I believe the single biggest factor to the market's continued stability was the announcement by the Federal Reserve to buy corporate bonds. This has NEVER been done before and was a HUGE deal. The announcement came on March 23rd. 'Oddly' that also happens to be the very bottom of the March sell off panic. https://www.nytimes.com/2020/03/23/business/economy/coronavirus-fed-bond-buying.html https://www.nytimes.com/2020/03/23/business/economy/coronavi... Those purchases just started happening. As such, I expect the markets to continue as if there is no Covid Crisis as it is viewed as a short term issue that has been mitigated at a corporate cash flow point by this Federal Reserve buying. https://www.marketplace.org/2020/06/16/the-fed-starts-buying-corporate-bonds/ https://www.marketplace.org/2020/06/16/the-fed-starts-buying...
paulmd 6y ago
apart from the pure financial stuff that others are discussing - COVID means that Microsoft is selling a lot of product right now. There are a LOT of PCs getting built right now, and what goes on them? Microsoft's OS and Microsoft's office suite. And I would not be surprised if a lot of places that may have been reticent to move into the subscription-based cloud model are suddenly seeing the light now that work has suddenly become decentralized and remote. Anyone who is selling collaboration or telework tools (Zoom, Citrix, etc) is benefiting hugely from this pandemic. Dunno if you have tried to find PC parts lately but things like power supplies are extremely difficult to get your hands on right now. I have seen $100+ for a shit-tier random-brand gold power supply, take it or leave it, because right now there is just no supply. 30% of America is suddenly working from home and a significant number of those are building rigs for their new home office. Monitors are another, the impact on the monitor market is palpable, basic productivity monitors (60 hz 24" 1080p and 27" 1440p) are up 50% or more in some caases from the start of the year. I consider myself lucky that I am sitting on a great ultrawide gaming monitor and a lot of misc hardware, as things have been heating up this summer I pulled my J5005 NUC off one of the TVs and reformatted it yesterday so now I don't have to run my power-hungry gaming rig just to do citrix.
- georgeecollins 6y ago
  Or webcams! It was so hard to find a decent webcam in April. I am sure they are selling much better than normal to this day.
johnvanommen 6y ago
> MSFT gained 30% over 6 months (that's compared to pre COVID levels), what's changed that much? 1) assets are denominated in dollars 2) the amount of dollars in circulation has increased about 40% in 2020 3) Therefore, asset prices go up That's all there is to it.
devxpy 6y ago
I don't understand why everyone cares so much about stock price, an almost arbitrary measure of the value of a company, based on sentiments and not facts. Isn't total equity the real indicator of the company's value in money?

qeternity 6y ago

The Fed.

jjoonathan 6y ago

> what's changed Passive cash flows became more expensive. Money got pushed into Microsoft, not pulled into it.

enilakla 6y ago
Exactly
rsp1984 6y ago
Mind explaining what you mean by "passive cash flows" and why they became more expensive?
- Spivak 6y ago
  MS didn’t become more valuable in a vacuum. It’s just with the pandemic hurting so many businesses the value of a stable mature company that’s still making money went up.
  - take_a_breath 6y ago
    The price/earnings ratio went up. You are paying more for each dollar of MS profit compared to last year (which was already a high P/E ratio). It’s another form of inflation.
- misja111 6y ago
  Passive cash is cash that is invested relatively risk free, such as in A status government bonds. 10Y treasury rate dropped by 1 percent point this year: https://ycharts.com/indicators/10_year_treasury_rate https://ycharts.com/indicators/10_year_treasury_rate

enilakla 6y ago

Pretty much - Large and Mega cap is performing well because at the end of the day it’s small businesses that will struggle while the larger entities can ride it out. Add a few trillion in cash and the writings on the wall. I also suspect the decision makers don’t really want asset prices to go to shit, so better for them to issue more debt and let the next generation deal with it.

nabla9 6y ago

SP 500 Equal Weight Index is down -11.63% YTD. (every company in SP500 EWI has the same weight). Most companies in SP500 are down. Stocks hurt because of COVID are losing value, those who are not affected or benefit gain. High prices in tech sector reduces their expected future ROI. That's completely acceptable because other investments are worse.

vmception 6y ago
and the universe of good investments is small while the universe of the money supply has expanded so we will so oversized capital misallocation, until it is not considered a misallocation anymore comparative metrics of the individual companies just because they happen to be publicly traded shares is not relevant or holistic enough
- sdenton4 6y ago
  Funny how when redistribution of wealth is mentioned everybody gets all "oh noes, inflation! if poor people can eat then the food will cost too much." But this is kinda what we're seeing on the stock side... there's too much wealth aggregated in the hands of people who already have enough [food, shelter, education, etc] chasing a small world of actually-not-so-great-right-now investments. The fundamental problem of capitalism is that it only solves the problems of people with money. Put the money in the hands of people with more problems, and those problems will get solved. (On the 'oh noes, inflation' side, many of these problems can be solved by services, which create their own supply over time as people take the new jobs created by new demand.) As it is, a massive amount of wealth is tied up doing nothing but looking dumb...
  - seamyb88 6y ago
    I upvoted you. You get lots of people on here who are systems engineers, or love solving complicated problems. But when it comes to wealth inequality, it's just a fundamental law of nature that cannot be changed. In reality, it can be solved with a pie chart. They want a taste of the high life. Sucked in by the apprentice and high fructose.

rsp1984 6y ago

Post COVID the world economy is no longer growing, so stocks of companies that do grow are at a premium now.

levesque 6y ago
That makes a lot of sense.
luspr 6y ago
I think prices today are to some extend inflated by government action. But it is hard to tell by how much, since also the global economy will grow again very soon. And if anyone benefits from more digitization and remote work it is MSFT. Also for MSFT specifically, I think the company is in a very good spot right now with its cloud business, gaming and office, developer and productivity software
- nogabebop23 6y ago
  I suspect MSFT is reaping a huge gain from the combination of business tooling (office, applicaitons, infrastructure), cloud-hosted environments and high-touch customer management. With all those workers remote, companies have huge IT workloads to support them. Would you rather be calling your MS rep these days or trying to find a human at Google?
  - victords 6y ago
    Let's not forget about the Xbox gamers working from home that are secretly playing games during boring meetings.

rwmj 6y ago

Right. Intel stock is still somewhere around double what it was only 3 years ago, and I'm pretty sure that they're not in a better situation re EUV, 10nm, competition from AMD etc. than 3 years ago.

melvinroest 6y ago

In the book The Intelligent Investor I got a feel for how long optimistic views can last (TL;DR 5+ years). And then 2000 - 2003 happened.

yangminded 6y ago

The public noticed the value of technologies MSFT offers. Not everyone who has money and invests understands what Cloud is or why MS Teams is something that might sell well. Covid-19 gave all those people a very visual example of the value proposition.

Ecstatify 6y ago

Microsoft are killing it in enterprise. Our company is moving hundreds of servers to the cloud (Azure). Our company owns it's own datacenter, has a strategic partnership with another cloud provider (CEO supports the cloud provider publicly) but we're still moving to Azure. Since the start of the pandemic we have thousands of users moving from Skype for Business(on premise) to Microsoft Teams(subscription). Microsoft Teams has more users than Slack now. Once you're on the Microsoft train it's hard to get off. New Xbox coming out I believe at the end of the year. I think companies that don't have the necessary skills(my company) need to move to cloud our they will die, our core business isn't maintaining servers. Microsoft have really turned it around with developers, embraced open source, built great developer tools.

sithlord 6y ago
to be fair, teams has more users than slack because they effectively give away teams with o365, and then claim all the people who have o365 use teams. Lots of companies use o365 (so get counted for teams) then, use slack as there actual chat app. With that said, our company recently switched from slack to teams, and its been a fairly annoying change. Teams is miles behind slack in terms of usability.
- deleted 6y ago
  [deleted]
- Ecstatify 6y ago
  Yeah slack is definitely the superior product, I think it was a great strategy by Microsoft to give the free 1 year subscription. Gives them some time to catch up to slack.
  - deleted 6y ago
    [deleted]
- kwww 6y ago
  Since coronavirus Microsoft has the NHS (~1.7M employees) on teams.

csomar 6y ago

The market had a chance to correct itself; or worse, get into a depression (bear market). But that didn't happen. It suggests two things: 1- Either the market is not over-priced and these companies have strong revenues and fundamentals; or 2- The US dollar is discretely hyper-inflating and it's showing only on stocks and other similar assets at the moment. Sure there is a chance that we are in a bubble (by the way, we have been saying that since 2010. That's over 10 years) but after Covid, I think that fundamentals have changed.

Wohlf 6y ago
I think there's just nothing better to invest in right now, and wealthy people have a lot of capital. With things how they are in Hong Kong maybe there's even more capital flight out of China because they see the writing on the wall.
- bobsoap 6y ago
  > I think there's just nothing better to invest in right now I think this might be the biggest reason. With B&M falling like flies left and right, people are shifting their investments. I don't think it's limited to "wealthy people" either. I'm sure the Fed's buying spree/inflation is a factor as well, however. Interesting times.
- albertop 6y ago
  Agreed. I think this is still the case of: “Bears swimming in liquidity”

MobileVet 6y ago

I have been spending quite a bit of time trying to understand how the market is doing so well. There are quite a few variables, as in most complex systems, and many have been outlined Robinhood etc here. However, I believe the single biggest factor to the market's continued stability was the announcement by the Federal Reserve to buy corporate bonds. This has NEVER been done before and was a HUGE deal. The announcement came on March 23rd. 'Oddly' that also happens to be the very bottom of the March sell off panic. https://www.nytimes.com/2020/03/23/business/economy/coronavirus-fed-bond-buying.html https://www.nytimes.com/2020/03/23/business/economy/coronavi... Those purchases just started happening. As such, I expect the markets to continue as if there is no Covid Crisis as it is viewed as a short term issue that has been mitigated at a corporate cash flow point by this Federal Reserve buying. https://www.marketplace.org/2020/06/16/the-fed-starts-buying-corporate-bonds/ https://www.marketplace.org/2020/06/16/the-fed-starts-buying...

paulmd 6y ago

apart from the pure financial stuff that others are discussing - COVID means that Microsoft is selling a lot of product right now. There are a LOT of PCs getting built right now, and what goes on them? Microsoft's OS and Microsoft's office suite. And I would not be surprised if a lot of places that may have been reticent to move into the subscription-based cloud model are suddenly seeing the light now that work has suddenly become decentralized and remote. Anyone who is selling collaboration or telework tools (Zoom, Citrix, etc) is benefiting hugely from this pandemic. Dunno if you have tried to find PC parts lately but things like power supplies are extremely difficult to get your hands on right now. I have seen $100+ for a shit-tier random-brand gold power supply, take it or leave it, because right now there is just no supply. 30% of America is suddenly working from home and a significant number of those are building rigs for their new home office. Monitors are another, the impact on the monitor market is palpable, basic productivity monitors (60 hz 24" 1080p and 27" 1440p) are up 50% or more in some caases from the start of the year. I consider myself lucky that I am sitting on a great ultrawide gaming monitor and a lot of misc hardware, as things have been heating up this summer I pulled my J5005 NUC off one of the TVs and reformatted it yesterday so now I don't have to run my power-hungry gaming rig just to do citrix.

georgeecollins 6y ago
Or webcams! It was so hard to find a decent webcam in April. I am sure they are selling much better than normal to this day.

johnvanommen 6y ago

> MSFT gained 30% over 6 months (that's compared to pre COVID levels), what's changed that much? 1) assets are denominated in dollars 2) the amount of dollars in circulation has increased about 40% in 2020 3) Therefore, asset prices go up That's all there is to it.

devxpy 6y ago

I don't understand why everyone cares so much about stock price, an almost arbitrary measure of the value of a company, based on sentiments and not facts. Isn't total equity the real indicator of the company's value in money?