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1. His views on the general tech market are somewhat banal (though impressive for someone who was only 23 at the time). It is your standard zerohedge analysis t

by npalli 12y ago

1. His views on the general tech market are somewhat banal (though impressive for someone who was only 23 at the time). It is your standard zerohedge analysis that fed is printing money and it is causing a tech bubble. Can anyone track and connect the dots from fed bond buying to increase in Facebook share price? I don’t think anyone knows. 2. His comments on facebook are much more fascinating though. One thing I did not understand is where all the mobile money on facebook is coming from. Looks like it is from app installs (don’t think FB breaks it out) which in turn is created by VC funding bubble. The VC's fund because they see mobile on Facebook is taking off. Close the loop, classic bubble. So the whole scheme is likely to end pretty badly for facebook (sounds plausible). PG talked about the dot com bubble and the impact of VC funded ad buying that led to increasing market cap for yahoo until it burst “By 1998, Yahoo was the beneficiary of a de facto Ponzi scheme. Investors were excited about the Internet. One reason they were excited was Yahoo's revenue growth. So they invested in new Internet startups. The startups then used the money to buy ads on Yahoo to get traffic. Which caused yet more revenue growth for Yahoo, and further convinced investors the Internet was worth investing in. When I realized this one day, sitting in my cubicle, I jumped up like Archimedes in his bathtub, except instead of "Eureka!" I was shouting "Sell!"” http://www.paulgraham.com/yahoo.html http://www.paulgraham.com/yahoo.html Edit: I should have guessed, people are more interested in supplying ready made narratives from the past five years for point 1 (which is not that interesting) than point 2. SMH. Some cool narratives are being provided which I heard almost verbatim at various points in the past five years that “explained” how -- 1. We will have world wide inflation of epic proportions (reality: world is fighting deflation all over) 2. ECB is doing a great job compared to the fed continuing with QE2 in 2011 (reality: recession in Europe vs the US) 3. Gold will soar through the roof (reality: slump) 4. Oil prices will rise forerver (until they collapsed) 5. House prices in China will go to sky (until they stopped doing) 6. Apple was up 100% in late 2012 (until it collapsed by half six months later) Etc etc. I would have thought some humility would have set in the “FED is printing, things are inflated to sky crowd”. Nope, just doubling down. Always stay with the narrative explain something else until we get it right ☺. At least I admit I don't know how things work :-). Consider, there are $20 Trillion dollars of SWF’s in the world investing all over. What is the impact of these as opposed to QE?

cloakandswagger 12y ago
>"Can anyone track and connect the dots from fed bond buying to increase in Facebook share price? I don’t think anyone knows." It's only a "banal" conclusion because it's so blindingly obvious. Fed drives interest rates down via QE. When bond yields decrease, investors migrate to equities, especially high growth tech stocks. I've predicted since last year that we are in the midst of a QE-induced asset bubble that will probably pop in early 2017, leading to a 20% pull back. That Spiegel agrees is somewhat vindicating.
- foobarqux 12y ago
  Why 2017?
  - Zigurd 12y ago
    2017 is about as soon as the CBs can start returning to some semblance of pre-crash normality. The ECB could, for example, start a QE program soon. That's kind of shocking, even if one understands why.
    - Throwadev 12y ago
      What are CB's?
      - foobarqux 12y ago
        Central banks
_sword 12y ago
I agree quite a bit with him on point 1. Yield starved investors gobbling up more risk to get higher returns in a zero-interest rate policy environment. Also, low risk free rates mean lower costs of capital across the board and I feel that many companies that shouldn't be able to are able to raise more money since investors are yield starved. Also if you're running a DCF analysis on a company, lower risk free rates mean lower discount rates, meaning higher valuations on lower cash flows. Across the markets multiples have been expanding. On that note, a lot of his commentary seems to be smartly focused on being able to defend valuation outside of the VC universe on a solid EV/sales or EV/cash flow multiple basis. Choosing to go for a lower valuation in the near term makes it easier to argue about revenue growth in the future leading to valuation multiple expansion, possibly making investors more prone to accept price growth.

by npalli 12y ago

cloakandswagger 12y ago

>"Can anyone track and connect the dots from fed bond buying to increase in Facebook share price? I don’t think anyone knows." It's only a "banal" conclusion because it's so blindingly obvious. Fed drives interest rates down via QE. When bond yields decrease, investors migrate to equities, especially high growth tech stocks. I've predicted since last year that we are in the midst of a QE-induced asset bubble that will probably pop in early 2017, leading to a 20% pull back. That Spiegel agrees is somewhat vindicating.

foobarqux 12y ago
Why 2017?
- Zigurd 12y ago
  2017 is about as soon as the CBs can start returning to some semblance of pre-crash normality. The ECB could, for example, start a QE program soon. That's kind of shocking, even if one understands why.
  - Throwadev 12y ago
    What are CB's?
    - foobarqux 12y ago
      Central banks

_sword 12y ago

I agree quite a bit with him on point 1. Yield starved investors gobbling up more risk to get higher returns in a zero-interest rate policy environment. Also, low risk free rates mean lower costs of capital across the board and I feel that many companies that shouldn't be able to are able to raise more money since investors are yield starved. Also if you're running a DCF analysis on a company, lower risk free rates mean lower discount rates, meaning higher valuations on lower cash flows. Across the markets multiples have been expanding. On that note, a lot of his commentary seems to be smartly focused on being able to defend valuation outside of the VC universe on a solid EV/sales or EV/cash flow multiple basis. Choosing to go for a lower valuation in the near term makes it easier to argue about revenue growth in the future leading to valuation multiple expansion, possibly making investors more prone to accept price growth.