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opihiman2
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http://www.wired.com/2014/09/money-pouring-tech-like-1999and-thats-good/

 

I work in SV and in tech.  I saw the dot com boom and bust personally.  I think there is most definitely another tech bubble.

 

"Saying we're not in another bubble because it's not as high as 1999 is like saying that Kim-Jong-Un is not evil because he's not Hitler."

 

Great quote, and refreshing to hear it from one of the leading VCs. It's been mind-blowing to me that this line of thinking exists so prevalently in this market.

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From your opinion, which stage of the cycle are we in?

(planning to read the article you posted tonight but I did read the piece on Bill Gurley)

 

For the tech bubble?  Hard to say.  It's definitely a bubble, but not nearly as bad as it was during the dot com boom.  But, I also see a lot of heady valuations that don't make sense.  For example, in the venture capital arena, people are throwing money again at stupid ideas.  I haven't seen that in a long time.  It's almost like the days when IPO's in crappy companies would result in half a billion dollar valuations.  Except, the difference now is that these companies are not rushing for instant gold IPO's.  They're just burning through all of this investment capital doing ideas that are staid and stupid.  For example, Tindr knock-offs and things like that. 

 

Also, in SV, I see some other disturbing signs of a localized over heating economy due to the tech bubble.  The regional housing boom is pretty well known, which already shows signs of weakening.  But, the more interesting thing I've seen is the amount of construction I'm seeing all over the SF Bay Area--especially in SF.  I have NEVER ever seen that much new construction in SF ever.  There are so much cranes around the city, that I've counted over 25 huge cranes just from the bridge.  I must be missing some over the hills, etc...  I have never seen that before.  I would like to think that economically, that is a great sign.  However, the contrarian side of me thinks this is going to end in a bust.  Why?  That kind of economic activity cannot be sustained forever.  Once that construction is done, what else are they going to fix/build?  That will slow a lot of construction activity, and I'm sure that will create a slowdown in SV.

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I've been thinking of how to play this without going into specific companies. The best I could think of was shorting FDN. Any better ideas?

 

Nah, too early.  I'm in cautiously defensive mode.  End of QE3 should be interesting.  I don't think the markets will react like they did to QE1 and QE2 given the macroeconomic picture is much more better now than then, but it will still be interesting to see.  I just checked, and both times QEn ended, markets tanked from 15-19%.  So, the next month will be super interesting to watch. 

 

In 2 years, though, I think the pain is coming.  Inflation is coming for sure.  There is most definitely asset price inflation.  Currently, holding gains of US household assets as a percentage of gross domestic purchases is at levels only seen during the dot com and housing boom.  There is also rapid expansive of thin-air credit even though QE is winding down.  There is just under a 50% chance that inflation will start to rise in 2 years.  I believe that's when the crap will hit the fan.

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I don't think there will  be inflation. For inflation people need to start spending a lot. cost of a lot of things are going down. Unemployment has been steadily on the rise in the last decade. And as for house prices, when a lot of babyboomers start selling their house when they get really old, there will not be as much buyers.

 

So basicly cost is going down, and demand is also not likely to go up, unless there will be a big employment boom sometime soon. Which is not likely with more and more things being automated.

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I don't think there will  be inflation. For inflation people need to start spending a lot. cost of a lot of things are going down. Unemployment has been steadily on the rise in the last decade. And as for house prices, when a lot of babyboomers start selling their house when they get really old, there will not be as much buyers.

 

So basicly cost is going down, and demand is also not likely to go up, unless there will be a big employment boom sometime soon. Which is not likely with more and more things being automated.

 

Really?  So, were people spending a lot during the 70's oil shock and stagflation?  I don't think so.

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wasn't that a combination of bad monetary policy and rising oil prices? I doubt oil will go up much in the next decade with all the alternatives coming online. Oil consumption has been going down the last decade in the western world.

 

Also if you hold unemployment next to CPI, you see that unemployment spikes up after inflation went up (and then causing it to go down again).  I think the 70's was just a perfect storm of all those factors.

 

For example in 73 unemployment was 5% then as it goes to 9% inflation goes down to 5%. When it is in the 5-7% range inflation starts to spike up to  14%. Following this unemployment shoots up to 10%. But when unemployment is at 8-10% in the early 80's inflation goes down all the way to 1%.

 

Mix this in with bad timing in monetary policy and sudden spiking oil prices and you get wild inflation spikes.

 

I don't think these conditions exist today.

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More bubble news:

 

https://ca.finance.yahoo.com/news/guy-turned-down-500-million-223837069.html

 

$1 billion valuation for a company that does stupid surveys in "the cloud".  Hahaha, oh my gawd.  This reminds me of the days of Pets.com and Webvan.  All you need is some hot marketing buzz words in your business plan and boom, VC's are throwing money right at ya nowadays.

 

 

 

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More bubble news:

 

https://ca.finance.yahoo.com/news/guy-turned-down-500-million-223837069.html

 

$1 billion valuation for a company that does stupid surveys in "the cloud".  Hahaha, oh my gawd.  This reminds me of the days of Pets.com and Webvan.  All you need is some hot marketing buzz words in your business plan and boom, VC's are throwing money right at ya nowadays.

 

The article you linked to makes the company sound pretty legitimate. I have no idea why this reminds you of Pets.com and Webvan.

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