4 ms·

Bank of England warns U.S. tech stock valuations may be out of whack

30 points by pg_1234 3y ago

VirusNewbie 3y ago
so the average for the SP 500 is 18x earnings and Goog is 21? Do people doubt that Apple and Google are run slightly better than the average F500? I'm actually surprised they're so close.
- kdwikzncba 3y ago
  18x doesnt sound like a crazy valuation
  - wenebego 3y ago
    About average, historically
instagib 3y ago
Probably not a good thing that the central bank is speaking up. >>The most famous exception was former Fed chief Alan Greenspan, who warned of “irrational exuberance” in the stock market in a speech in December 1996. Fueled by the tech bubble of the late 1990s, stocks didn’t top out for more than three years after Greenspan’s remarks, and ever since central bankers have mostly avoided commenting on asset values.<< why the tech stocks are valued higher than the s&p: https://schrts.co/rmEqWAFg https://schrts.co/rmEqWAFg 200% return over 5 years with Microsoft. 29x valuation. 157% return google. 21x 57% return S&P 500. 18x 814% Nvidia return. 31x 89% RSPT return (s&p tech ETF).
- rixed 3y ago
  What's the point comparing individual samples to an average?
  - instagib 3y ago
    I used the quotes mentioned in the link.
dv_dt 3y ago
Feel free to evaluate the face value of the comment, but in general it feels a odd that one nation's central bank is commenting on valuation of a particular stock sector of another nation. Did our central bank impugn the value of the British financial markets due to Brexit?
- pixl97 3y ago
  Honestly this doesn't seem very weird at all. Central banks commonly warn when they see uncertainty in areas where large amounts of money are being invested because it also threatens their own stability. Or did you forget when the 2008 (US) housing crisis spread world wide?
  - dv_dt 3y ago
    That particular crisis was missed by just about every central bank until it collapsed. It was due to the leverage being hidden behind traditionally solid assets. That kind of surprise collapse today is unlikely with tech stocks - that is already known and widely planned for volatility. What has not been planned for is possible collapse of commercial real estate valuations which did not anticipate much volatility. The whole game of increasing interest rates is to increase the strain gradually to slow and hopefully not collapse portions of the economy. But we will see as the entire world seems to be more wobbly operating on entrenched assumptions.
    - darkclouds 3y ago
      [dead]
smileysteve 3y ago
I felt this when Amazon bought mgm for $9b; the rights to a century of movies and "unicorn"s which aren't so rare anymore are worth almost as much
JSR_FDED 3y ago
They previously warned of the impending collapse of Silicon Valley Bank. Worth taking seriously. https://www.ft.com/content/19d76cf1-4836-4dde-b228-26faee5c8126 https://www.ft.com/content/19d76cf1-4836-4dde-b228-26faee5c8...
deleted 3y ago
[deleted]
FireBeyond 3y ago
At the risk of being somewhat low value, "I am Jack's complete lack of surprise". I've been looking around in the job market recently. Seen plenty of startups with quite questionable business ideas (I am certainly not a savant, but have been heavily involved in product development and management) with statements like "we are early stage and are valued at $3B". Are you? Are you really? Or rather, you may be valued (and I realize I'm talking private, not public) at that, but are you worth it? All too often, the answer I come up with is "not really, no".
- Havoc 3y ago
  To steal fireship's joke "we're pre-revenue, pre-idea, pre-everything...1B val"
- junofan 3y ago
  > All too often, the answer I come up with is "not really, no". As an employee you get common stock, so multiply by 20% as a rule of thumb.
- toomuchtodo 3y ago
  If you’re not asking for a 409A or the most recent transaction demonstrating an arms length valuation, you’re getting taken for a ride. Make them prove it.
  - Havoc 3y ago
    Recent transactions don't help if the entire sector is overvalued. Just tells you that you're aligned with the overval.
    - toomuchtodo 3y ago
      True and a fair point. Regardless, knowing the broad asset sentiment is good for how you’re investing fiat, knowing the single named private security valuation is good for how you’re investing your time.
  - junofan 3y ago

30 points by pg_1234 3y ago

so the average for the SP 500 is 18x earnings and Goog is 21? Do people doubt that Apple and Google are run slightly better than the average F500? I'm actually surprised they're so close.

kdwikzncba 3y ago
18x doesnt sound like a crazy valuation
- wenebego 3y ago
  About average, historically

instagib 3y ago

Probably not a good thing that the central bank is speaking up. >>The most famous exception was former Fed chief Alan Greenspan, who warned of “irrational exuberance” in the stock market in a speech in December 1996. Fueled by the tech bubble of the late 1990s, stocks didn’t top out for more than three years after Greenspan’s remarks, and ever since central bankers have mostly avoided commenting on asset values.<< why the tech stocks are valued higher than the s&p: https://schrts.co/rmEqWAFg https://schrts.co/rmEqWAFg 200% return over 5 years with Microsoft. 29x valuation. 157% return google. 21x 57% return S&P 500. 18x 814% Nvidia return. 31x 89% RSPT return (s&p tech ETF).

rixed 3y ago
What's the point comparing individual samples to an average?
- instagib 3y ago
  I used the quotes mentioned in the link.

dv_dt 3y ago

Feel free to evaluate the face value of the comment, but in general it feels a odd that one nation's central bank is commenting on valuation of a particular stock sector of another nation. Did our central bank impugn the value of the British financial markets due to Brexit?

pixl97 3y ago
Honestly this doesn't seem very weird at all. Central banks commonly warn when they see uncertainty in areas where large amounts of money are being invested because it also threatens their own stability. Or did you forget when the 2008 (US) housing crisis spread world wide?
- dv_dt 3y ago
  That particular crisis was missed by just about every central bank until it collapsed. It was due to the leverage being hidden behind traditionally solid assets. That kind of surprise collapse today is unlikely with tech stocks - that is already known and widely planned for volatility. What has not been planned for is possible collapse of commercial real estate valuations which did not anticipate much volatility. The whole game of increasing interest rates is to increase the strain gradually to slow and hopefully not collapse portions of the economy. But we will see as the entire world seems to be more wobbly operating on entrenched assumptions.
  - darkclouds 3y ago
    [dead]

smileysteve 3y ago

I felt this when Amazon bought mgm for $9b; the rights to a century of movies and "unicorn"s which aren't so rare anymore are worth almost as much

JSR_FDED 3y ago

They previously warned of the impending collapse of Silicon Valley Bank. Worth taking seriously. https://www.ft.com/content/19d76cf1-4836-4dde-b228-26faee5c8126 https://www.ft.com/content/19d76cf1-4836-4dde-b228-26faee5c8...

deleted 3y ago

[deleted]

FireBeyond 3y ago

At the risk of being somewhat low value, "I am Jack's complete lack of surprise". I've been looking around in the job market recently. Seen plenty of startups with quite questionable business ideas (I am certainly not a savant, but have been heavily involved in product development and management) with statements like "we are early stage and are valued at $3B". Are you? Are you really? Or rather, you may be valued (and I realize I'm talking private, not public) at that, but are you worth it? All too often, the answer I come up with is "not really, no".

Havoc 3y ago
To steal fireship's joke "we're pre-revenue, pre-idea, pre-everything...1B val"
junofan 3y ago
> All too often, the answer I come up with is "not really, no". As an employee you get common stock, so multiply by 20% as a rule of thumb.
toomuchtodo 3y ago
If you’re not asking for a 409A or the most recent transaction demonstrating an arms length valuation, you’re getting taken for a ride. Make them prove it.
- Havoc 3y ago
  Recent transactions don't help if the entire sector is overvalued. Just tells you that you're aligned with the overval.
  - toomuchtodo 3y ago
    True and a fair point. Regardless, knowing the broad asset sentiment is good for how you’re investing fiat, knowing the single named private security valuation is good for how you’re investing your time.
- junofan 3y ago