The bubble that will burst

[showa58taro]

When Will the Tech Bubble Burst?
https://www.nytimes.com/2017/08/05/opin ... burst.html

Hoping you guys can read, one of the chief investors at Morgan Stanley wrote an excellent piece about the cyclical economy and the upcoming possible burst of the current Bull market in the tech sector. Also has an interesting piece about Unicorns.

It makes zero mention of politics and Trump so not the typical article for the politics section but I find it very interesting.

I think it's one of those things where I am finally starting to get the cyclical out of economics and how there tends to be a bust after these booms. I was mainly thinking about it in the context of the current market highs compared to fiat currency lows for s few major economies, but it bears reading in general. It's frightening to think we can't get control of investment strategies enough to make them responsible. Which when you consider how much state and government pensions rely on investment in funds, is quite impressive. I like the speculation aspect but the values are creepily huge. $60 billion per annum in PE investment is just bananas.

[Foo]

Thing thing with technology is that it is always speculative, rather than based on past performance. The moat around these businesses are based on brand loyalty, innovation, and capital.

What stops a dozen other companies from sapping market share from Amazon? From Apple? Sears was Amazon once. GM and Ford were both Apple. All went broke.

Without a doubt, that sector continues to grow, just as a horse race will end. The issue with investing is which one wins and which one breaks its leg and gets shot. So the bubble is not the sector in the the foreseeable future, but the companies in that sector.

[showa58taro]

Thing thing with technology is that it is always speculative, rather than based on past performance. The moat around these businesses are based on brand loyalty, innovation, and capital.

What stops a dozen other companies from sapping market share from Amazon? From Apple? Sears was Amazon once. GM and Ford were both Apple. All went broke.

Without a doubt, that sector continues to grow, just as a horse race will end. The issue with investing is which one wins and which one breaks its leg and gets shot. So the bubble is not the sector in the the foreseeable future, but the companies in that sector.

So do you think that the growth we are seeing is sustainable for the big brands? Or will it also peak and decline in your view.

[Foo]

Thing thing with technology is that it is always speculative, rather than based on past performance. The moat around these businesses are based on brand loyalty, innovation, and capital.

What stops a dozen other companies from sapping market share from Amazon? From Apple? Sears was Amazon once. GM and Ford were both Apple. All went broke.

Without a doubt, that sector continues to grow, just as a horse race will end. The issue with investing is which one wins and which one breaks its leg and gets shot. So the bubble is not the sector in the the foreseeable future, but the companies in that sector.

So do you think that the growth we are seeing is sustainable for the big brands? Or will it also peak and decline in your view.

I think we are a ways off peak, but the problem with the big brands is they have so much speculation built into their pricing already. It is entirely possible that something like facebook or amazon no longer is a market leader in several years because of the leaps and bounds nature of technology. If someone jumps them in the game, what happens? The jumper becomes the new market leader out of nowhere and all that speculatory value built into the others disappears.

Personally, I believe something like Tesla is prime to fail. The is a certain cult around Elon Musk and that product right now, but there are companies with car building experience and infrastructure to deliver them and service them that put Tesla at great risk. GM could build electrics and a phenomenal pace tomorrow and have chargers and repair technicians all over the country via their dealer network.

[showa58taro]

Thing thing with technology is that it is always speculative, rather than based on past performance. The moat around these businesses are based on brand loyalty, innovation, and capital.

What stops a dozen other companies from sapping market share from Amazon? From Apple? Sears was Amazon once. GM and Ford were both Apple. All went broke.

Without a doubt, that sector continues to grow, just as a horse race will end. The issue with investing is which one wins and which one breaks its leg and gets shot. So the bubble is not the sector in the the foreseeable future, but the companies in that sector.

So do you think that the growth we are seeing is sustainable for the big brands? Or will it also peak and decline in your view.

I think we are a ways off peak, but the problem with the big brands is they have so much speculation built into their pricing already. It is entirely possible that something like facebook or amazon no longer is a market leader in several years because of the leaps and bounds nature of technology. If someone jumps them in the game, what happens? The jumper becomes the new market leader out of nowhere and all that speculatory value built into the others disappears.

Personally, I believe something like Tesla is prime to fail. The is a certain cult around Elon Musk and that product right now, but there are companies with car building experience and infrastructure to deliver them and service them that put Tesla at great risk. GM could build electrics and a phenomenal pace tomorrow and have chargers and repair technicians all over the country via their dealer network.

My concern is that the removal of the speculation is what causes big recessions and even bigger economic losses as the futures trading slows down and we see less economic bullishness. Last time that created a massive mess.

For me as well the best solution is different to your solution I'd imagine. The best challenge to PE valuations that overspeculate is more of my guys. More audits for all companies and proper ones can have the ability to ward off some of the more severe PE ratio fixes and can at the very least weed out weaker investments earlier with more regulation and more transparency. But I feel like that's not your bag when it comes to solutions.

[Foo]

Actually, I think more transparency is necessary with publicly traded stocks. I also believe IPOs should be highly regulated.

I do not oppose disclosure. People should be aware of the risks and current status. That being said, you don't want to take speculation out of investing, because that is the point. The entire reason you invest in technology companies is because of where they are going, and without investment there is no capital.

There is also a fine line as you want the public to have access to investing in high growth arenas. Otherwise only the wealthy could do so as private investors. Right now, literally anyone can invest in the future prosperity of Apple, Amazon, Walmart, etc, and that is s door that must be kept open.

Where I want government out is more day to day operations where the market can make value judgements. People can tell each other whether a phone, chicken sandwich, or video game is good. They can't do that with a stock.