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Last Time It Was This Crazy, the Stock Market Crashed
- Netcob 12y agoOr: the startup singularity is near!
- lotsofmangos 12y agoIs that where Jeff Dean suddenly acquihires the ability to use 100% of his brain and automates all the work for every single US corporation, making the rest of the population unemployed overnight, other than those lucky few who can grab jobs fetching Jeff coffee?
- Netcob 12y agoNah, that would be too much actual value. I think it's shortly after tweeting something like "poopr - have your BMs delivered to your friends with quadcopters every day for free" makes Facebook buy your twitter account for $25 billion.
- eli_gottlieb 12y agoSo you're saying I'll soon be able to pick up a bunch of undervalued stocks?
- dagw 12y agoPossibly. The trick is to spot them among all the stocks will have dropped from very overvalued to just overvalued.
- junto 12y agoI've recently sold all my long term shareholdings on a similar gut feeling. I wonder what will be the trigger that sets off the selling frenzy this time round?
- dualogy 12y agoLooking back we'll find it was this very comment of yours. How do you feel about that ;)
- deleted 12y ago[deleted]
- junto 12y agoSlightly scared: http://www.theguardian.com/business/blog/2014/oct/16/six-reasons-the-worlds-stock-markets-are-falling http://www.theguardian.com/business/blog/2014/oct/16/six-rea...
- rootofunity 12y agoI think the trigger will be as most bubbles. Every joe shmoe on main street starts buying and profiting off these start ups in some way or another then smart money takes it's profits, prices dive slightly, main street panics and there you have it.
- 1945 12y agoThe market has the capacity to stay irrational. I would not start shorting after a 3-4% pullback..
- lotsofmangos 12y agoI think most people have that saying the wrong way round. 'The market can temporarily look like it is rational', would seem more accurate.
- lmm 12y agoIf the market goes "rational" where that was what you were betting on, you make money. You go bankrupt when the market "stays irrational", i.e. the stocks you thought were overpriced stay overpriced.
- jmnicolas 12y agoI think the complete saying is "the market has the capacity to stay irrational longer than you can remain solvent".
- marcus_holmes 12y agoI remember the dot-com bubble and how it all went really bad really quick. I still haven't heard any convincing reason why "this time it's different".
- bello 12y agoIt's different because this time it's VC money, not people's savings. When a company is listed, the stock price better reflect the actual market value of the company (otherwise a dot-com bubble happens). However, if rich VCs like to bet on startups, that's expected to be a high-risk investment.
- bhouston 12y ago> it's VC money, not people's savings. Well, technically VC money is people's savings, usually parts of pension funds I believe.
- lmm 12y agoA little of it is pension funds or sovereign wealth funds, but most of it is from high-net-worth individuals. Investors are required to be financially sophisticated; they know the risks they're taking.
- davidw 12y agoThe Dot Com bubble was VC-fueled too. Probably more so than this go-round, because it took more capital to start most kinds of companies back then.
- smt88 12y agoIf VCs lose all their money, it won't be anything new. Only a tiny fraction of VCs provide a return, after you take out the managers' fees. Large firms pump money into VCs almost charitably or as a PR thing -- they rarely expect much out of it, and their portfolios certainly aren't made or broken by their VC bets.
- notastartup 12y agoI'm very worried about the property bubble collapse in China that will happen in the near future. I'm seeing the same patterns. People from said country buying up expensive property overseas, people lose fortune when property bubble explodes. It happened with Japan (remember when Japanese yakuza were buying up property in West coast). It surely to happen with China (buying up property in west coast like crazy).
- melvinmt 12y agoCan you explain why a collapse in China would affect the West Coast?
- smt88 12y agoSeems s/he's saying that wealthy Chinese people are buying property on the West Coast of the US. If their market crashes and individual wealth drops, they wouldn't be able to pay their mortgages, which I guess would be a problem for lenders in the US? Lots of leaps here, but I can see a connection if his/her facts are right.
- notastartup 12y agohigh valuation comes from people paying high prices, mainly from China. if these people were to default or sell mode it would push the real estate valuation down significantly.
- forrestthewoods 12y ago"A parabolic rise in start ups with valuations of $1 Billion or More" or "A linear rise in startup valuations on a logrithmic scale". Amazing what happens in 10 years when worldwide smartphones go from a tens of millions a year (2004) to over a billion a year (2014). Apple has 130 billion in cash sitting overseas with nothing to spend it on. Microsoft has 90 billion. Google has at least 30 billion. Facebook has over 10 billion cash (domestic + foreign). So yeah. Startups are going to be valued at over a billion. Because there are more than a couple of potential buyers who can spend that in cash. My rule of thumb is that if you can get 100,000,000 users you can sell for $1,000,000,000. You don't even need revenue! Crazy, but that is a shit load of users. How many 2000 dotcom companies had a hundred million users? Hell did even Google have a hundred million users back then?
- bhouston 12y agoYou are citing existing old ultra-successful companies, the best of the best, to justify the high valuation of startups now. That isn't much of an argument. > My rule of thumb is that if you can get 100,000,000 users you can sell for $1,000,000,000. Lots of users does equal success because you only have to monetize them at low numbers. But the number of 100M user companies is still very few. > Hell did even Google have a hundred million users back then? They had a dominant search position, so their percentage penetration of internet search was huge, maybe higher than it is now because China and its wall garden hasn't yet arisen.
- lotsofmangos 12y agoI don't think it was a comparison of quality, just an observation of spending clout. Things are being bought at billion dollar valuations that would have failed, just because the top players don't want to even think of risking their dominance, and that isn't going to stop unless they run out of money. This means that some of the easiest exits available are in making things like snapchat, where you will get bought just because you have users communicating over it.
- deleted 12y ago[deleted]
- qwerta 12y agoIt is all related to quantitative easing, there are not savings, but easy money around. Totally different dynamics compared to last stock bubble.
- bhouston 12y agoI have not read a good analysis as to the end game of quantitative easing. What does the end of that era fortell in terms of US macroeconomics and how does quantitative easing feed into the VC ecosystem? Or is quantitative easing here to stay and we will just have a related long term slow devaluation of the USD?
- qwerta 12y agoJust read basic economics, it is really simple. VC ecosystem is insignificant. Easing will stay until its results are aligned with leaders priorities.
- tonyedgecombe 12y agoWhen western governments hold so much debt the only realistic way of dealing with it is inflation, hence QE.
- rtpg 12y agoThe really interesting thing about QE is that we haven't really gotten inflation associated with it, at least not in any form bigger than pre-QE days. My pet theory is that money supply and inflation no longer have much of a correlation. In fact, they might never have.
- bhouston 12y ago> My pet theory is that money supply and inflation no longer have much of a correlation. In fact, they might never have. They have stronger correlations in small country economies. The US economy is sort of uniquely positioned in the world and that makes its exception and more complex. I think that with the US economy is that the repercussions of actions are delayed because the interconnections slow reactions down -- although this also lets things get unsustainable before the correction actually takes place.
- erikb 12y agoI'm reading things like this since 5 years. When do people start to analyse what's really happening instead of saying "according to what we experienced 10-15 years ago, it should be way worse than it was back then." There are reasons why the start-up market is still growing but wasn't in 2000.
- bhouston 12y ago> I'm reading things like this since 5 years. Just because there are repeated warnings about irrational exuberance, and we haven't had a correction YET, doesn't mean that there isn't irrational exuberance. > When do people start to analyse what's really happening instead of saying "according to what we experienced 10-15 years ago, it should be way worse than it was back then." I don't think it needs to be way worse that it was then. Corrections are different every time. > There are reasons why the start-up market is still growing but wasn't in 2000. Define "start-up market" and "growth", because in 2000 prior to the crash there was a ton of money going into startups, a ridiculous amount. It was only after the crash that things went sour.
- pearjuice 12y agoThe only ones loosing will be the lower end of the food chain. Everyone on top knows what's coming and is storing their assets on single state islands far away from where the water will be going dry. You really think all those SV people preaching "this is not a bubble" are 100% in and haven't at least liquidated 99% of their value from the stock market? All what's left is digits on screens and papers.
- eru 12y agoIf you are managing Other People's Money, you are better off staying invested and collecting fees.
- fidotron 12y agoWhat's often missing in these discussions is that a lot of the value of the companies is based on the threat they present to actual profitable companies, like Google and Facebook, and has nothing to do with whatever revenue they currently have. The real reason WhatsApp were worth so much is they started to look like an existential threat to Facebook. Similarly for Instagram and SnapChat. Uber will in the long run to Google. One of the best get rich startup models today is to create something where it looks like you'll take away the core raison d'etre of another entrenched service, and it will radically inflate your value.
- eru 12y agoInteresting. How will Uber be a threat to Google?
- smt88 12y agoI disagree with your premises as well as your argument. WhatsApp, Instagram, and SnapChat are valuable because they have users. There are a million ways to monetize users once you have them, but it's hard to get them. Google, Facebook, and others are large, humming machines that squeeze money out of users, but WhatsApp, Instagram, and SnapChat are not. The latter three companies are valuable because they can be fed into the larger machines that already figured out how to monetize. Unrelated: Uber certainly is a threat to a lot of companies (USPS, Zifty, DHL), but I can't see the Google connection. In fact, Uber and Google recently became partners. If anything, Google is a massive, existential threat to Uber because it's working to perfect self-driving cars.
- bhouston 12y agoAll self-driving cars are a threat to Uber, but it will be a really long time for fully self-driving cars to reach significant penetration, as much as I love them. I think for the next 10 years we will be in the era of smart assisted driving.
- smt88 12y ago1) I actually think self-driving cars are moving faster than expected. Ten years is still a pretty reasonable guess, considering the pace of governments and the auto industry, but we're closer than I thought we'd be by now. 2) Uber will use self-driving cars, probably exclusively as soon as it's legal. Uber wants to be the internet of the physical world. With the internet, information could travel anywhere with the tap of a finger. Uber wants the same reduction of friction for objects and people. The problem for Uber is it's already easy to poach drivers from Uber. Drivers don't care if they drive for Lyft or Uber because the payouts are pretty similar. I've met drivers who switched between both. When cars drive themselves, Uber will have to become even more competitive to stay on top. The cost of building an Uber-like fleet will be no more than buying the hardware. Remember how hosting companies proliferated in the 90s and early 00s? Until AWS and similar PaaS options, the hosting space was incredibly fragmented, and the margins were awful. That's what Uber has on the horizon.
- lotsofmangos 12y agoI would like to see a map showing where all this money is going by office location, coded for number of employees, as one thing that does seem odd for many of us outside a few very select areas is that we are hearing about this mega-splooge of massive quantities of cash, but very little of it seems to be filtering through to the wider economy. As far as I can tell it is being spent in very concentrated regions on relatively small amounts of people, largely on businesses that are trying to target the pockets of a rapidly shrinking middle class, which doesn't particularly bode well.
- neals 12y agoJust a thought, but before that crash, I wasn't actually using ANY of the websites that were valued so high. And I think not a lot of people really were? I read about the big investments back then, but to me, they never became more than a headline. Never a place to visit. More like "a place that I should visit, sometime in the future". It was full of promise, not of value. Though now, I use and actually pay for many services. I feel like they add a certain value that, back then, nothing did. Now, a billion dollar is a lot. But A billion people is too.
- anovikov 12y agoIn 1999 boom, Nasdaq P/E reached 200, while general stock market P/E was 'only' 34. 6 times the difference. This time it is around 24 and general market is at about 19. Just 25% the difference. So i think there is really nothing to be worried about. There are few extreme valuations, and when those correct (Zynga, Groupon, ...) it doesn't create a domino effect. Even Snapchat doesn't sound so stupid - it may never make any revenue, but having such a crowd of loyal users can bring a lot of cash to many companies who have already figured out their monetisation (Apple, Google, etc.) so they will be just buying a huge market. And they have a lot of cash to pay for what they buy, and sometimes they do actually buy. So people investing in Snapchat on these seemingly extreme valuations are likely not that stupid, or subversive.
- linkeex 12y agoI've always wondered what pure software startups are doing with millions of dollars. I mean come on you can develop awesome software without having a fancy office, nice furniture and a super high salary. Take me and my friends for example. We love building stuff and work for all our products in university or at home. Also we're doing it for, what, like 400$ a month working 20-30h...
- mtbcoder 12y agoAt some point, you will complete school, your friends will go their separate ways and you will lose access to university resources. At that point, you will need a decent salary to pay for living expenses, support a family and all the other things you wish to do in life. If your startup consists of even a handful of people, competitive salaries/benefits start to add up and those "millions" won't seem as much any more.
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- joezydeco 12y agoMan, I wish fuckedcompany.com was still around. What's Pud doing these days? If he won't do it, someone else should. It was a lot of fun back in Crash 1.0 days.