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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 hold

• deleted 6y ago
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• baconandeggs 6y ago
  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.
  • spideymans 6y ago
    > The "growth" in tech has been entirely driven by monetary policy. For the uninformed, what monetary policy exactly is driving this growth?
    • hpoe 6y ago
      Not OP but my guess is the low interest rates and the high amount of cash the Fed has been handing out.
    • free_rms 6y ago
      "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 said to do. So all of the inflation happened in assets held by banks and rich people instead -- tradeable securities and real estate in coastal areas.
      • spideymans 6y ago
        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?
    • _trampeltier 6y ago
      There is so much money around now, it has to go somewhere. Look here for ex. https://fred.stlouisfed.org/series/MABMM301USM189S https://fred.stlouisfed.org/series/MABMM301USM189S https://tradingeconomics.com/united-states/government-debt https://tradingeconomics.com/united-states/government-debt
    • AnotherGoodName 6y ago
      They're selling corporate bonds at extremely low interest rates right now: https://www.reuters.com/article/us-alphabet-bonds/google-owner-alphabet-issues-record-10-billion-bond-at-lowest-ever-price-idUSKCN24Z2PC https://www.reuters.com/article/us-alphabet-bonds/google-own... "Of the $10 billion on offer, the $1 billion five-year tranche was issued at a coupon of 0.45%, the lowest coupon seen on a U.S. corporate bond at that maturity, according to Refinitiv data, which goes back to 1980." I can give similar links for Apple: https://finance.yahoo.com/news/apple-joins-tech-borrowing-boom-123033535.html https://finance.yahoo.com/news/apple-joins-tech-borrowing-bo... The Coronavirus CARES act enables the Federal Reserve to buy Corporate Bonds. This is one of the factors driving down the bond rates: https://www.proskauer.com/alert/corporate-credit-facilities-under-the-cares-act https://www.proskauer.com/alert/corporate-credit-facilities-... "The SMCCF, initially funded with $25 billion of equity from Treasury, will leverage its equity ten times when acquiring corporate bonds from investment grade issuers and ETFs whose primary investment objective is exposure to investment grade corporate bonds. It will leverage its equity seven times when acquiring corporate bonds from issuers rated at below investment grade, and from three to seven times when acquiring other eligible assets, depending on risk." So if you're a large corporation capable of selling bonds you can get a loan for far less than even the extreme low end inflation predictions. The big tech companies have the ability to take advantage of the current climate.
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  • refurb 6y ago
    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.
    • est31 6y ago
      They have, but why wasn't that growth priced in?
      • edmundsauto 6y ago
        What makes you think it wasn't?
        • est31 6y ago
          If it was established that they'd grow their revenues, then why was it still outperforming other asset classes by this much? Does Wall street have lacking models of how tech businesses grow? Or are people too risk averse to invest into tech? What I don't get either is why quarterly reports in the current situation are so important for stock value in the current market climate, as in why did tech stocks soar so much after quarterly reports got announced? These numbers aren't showing anything other than how the companies perform in the current, corona-affected, economy and are not representative of how it's going to look like in a post corona world.
          • AznHisoka 6y ago
            Only some Wall Street firms use models to calculate cash flow and stock prices. A lot of them don't even care about such things. They just buy whatever has the most momentum, or whatever they think others love (Keynesian beauty contest), or whatever fits their thesis of the world.
          • edmundsauto 6y ago
            > why was it still outperforming other asset classes by this much? Because the future is uncertain, and that uncertainty was baked into the price? And there's nothing to say that "baked into the price" has to be accurate... investors could have collectively read the tea leaves wrong. > These numbers aren't showing anything other than how the companies perform in the current, corona-affected, economy Which could be considered passing a stress test with flying colors - maybe people are interpreting this as "which businesses are robust or anti-fragile for a once in a century event". Or just as easily - maybe investors are betting there's a chance that some of this current context is the new normal. I'm a little confused as to what you're trying to ask overall. Markets and investors aren't perfect, the future is uncertain, and random walks are everywhere.
  • Silhouette 6y ago
    The "growth" in tech has been entirely driven by monetary policy. Also a few billion people stuck at home much more than usual this year.
    • AznHisoka 6y ago
      FB, Google, and Microsoft all lowered their revenue guidance they set pre-COVID. This stay at home situation has clearly benefited some companies (Zoom, Docusign, Amazon), but definitely not most tech companies.
      • Silhouette 6y ago
        I'm not sure your sample is representative here. Facebook and Google are primarily ad companies, and it's unclear whether the current situation would be a net positive or a net negative over the entire set of businesses that might advertise with them. Meanwhile, markets like e-commerce, telecommunications and online entertainment are booming thanks to the stay-at-home culture, and no doubt there will also be an entire generation of new and/or rapidly growing products and services aimed at supporting home offices, flexible work patterns and more distributed teams. I'm not sure we'll ever go all the way back to how things were now, even if someone discovers a perfect cure for the coronavirus problem tomorrow. I think when the dust has settled, we will have learned that it's often useful to have specialised workplaces, but also that working from home is fine for some people doing some jobs at least some of the time if they want to. I suspect we'll see some big, permanent changes in industries like retail as a result, and that this in turn will sustain at least some of the boost that a lot of tech stocks have received recently.
        • AznHisoka 6y ago
          There are many non-ad companies whose revenue has not accelerated at all due to covid such as Salesforce, IBM, Atlassian, and DropBox. Sure most of them have not been terribly impacted as well, but the idea of “digital acceleration” simply has been a buzzword, not a reality. Even for some companies that have had some boost, the spike in share prices has been over exaggerated. One glance at the price movements and it’s fairly obvious. A company like DataDog or Fastly is NOT 2-4 times as valuable just because more ppl are working from home. This market is 99% fed-induced, and 1% actual fundamental improvement
  • xiphias2 6y ago
    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.
  • phatfish 6y ago
    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.
• drwoland 6y ago
  The sad thing is, at least in the UK start ups are often headquartered in the US to make it easy to chase valley VCs.
  • treebornfrog 6y ago
    Yup, a startup I invested in here in the UK at seed round just did the Delaware flip for their A.
  • Silhouette 6y ago
    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 it and get on with more important things. However, if you're bootstrapped and at first it's just three friends working out of someone's garage or a family business with an office in the dining room, that red tape can be a significant overhead that holds your business back from taking on staff and dedicated facilities and so on. Given this culture, it's hardly surprising that a lot of UK start-ups with ambitions of hockey stick curves look to the US for support. The alternative is fighting your way out of being a lifestyle business for some number of years, at the same time as trying to do whatever it is you do that actually has value.
    • stefanfisk 6y ago
      Whenever this argument comes up I feel like I'm missing something. which typical European regulations get in the way of bootstrapping startups?
      • zerkten 6y ago
        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_id=14544 https://ec.europa.eu/newsroom/horizon2020/document.cfm?doc_i...) which cover some of the issues.
• TristanDaCunha 6y ago
  > Google "European growth stocks". This short sentence contains irony.
• libertine 6y ago
  The problem is not the lack of exciting tech companies, but the ability - and interest - to retain them in Europe. Money is cheap in the US, and most of EU countries are quite pleasant to live without obscene amounts of money in the bank (basically thanks to public services), so any good offer it's quite convincing. Not to mention that EU governments don't see tech companies as strategic assets, unlike the US/China. So I guess it's a mix of culture/policies.
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  • Ericson2314 6y ago
    > Not to mention that EU governments don't see tech companies as strategic assets, unlike the US/China. Maybe that was once true, but it certainly isn't true today.
    • libertine 6y ago
      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 too naive, or the whole "trying to lead by example" doesn't work financially/growth wise.
      • Ericson2314 6y ago
        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.
        • wil421 6y ago
          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.
• fullshark 6y ago
  Feels like the big difference is people threw money at tech stocks last time in a bout of speculation, they're throwing money at them this time in a flight to safety.
• e40 6y ago
  Unfortunately, Europe doesn't seem to do much anymore. Google "European growth stocks". I want them back in the game. I don't want to hijack this thread, but why is that? Apropos to the political situation in the US right now (ugh), it's a constant point of the right wingers that you should vote for them because we don't want to become like them. I honestly don't know the answer. Tech didn't suffer under Obama, but he wasn't particularly liberal. I wonder what the simulation of a left wing POTUS would do for Americans.