Earlier this week, Greenlight Capital hedge fund manager David Einhorn reignited the bubble debate that we have spilled so many pixels dissecting. The shorter of Lehman Brothers and the New York Mets fan said in a quarterly letter to clients “we are witnessing our second tech bubble in 15 years.”

The Bubble Chatter is nothing new. Regular readers will recall this has been a n issue I enjoy exploring.  Indeed, it has been accompanying the current bull market since it lifted off its lows. Back in 2011, I even created a checklist of “How to Spot a Bubble in Real Time.” And more recently, in November of last year, I noted we seemingly have a “Bubble in Bubbles.”

There certainly are many anecdotal indications of froth. Secondary issues have increased. Mark Zuckerberg has made some questionable acquisitions at what looks like absurd valuations (but last I checked, Zuck is not the determiner of bubbles). We see that Mom and Pop are slowly coming back into the market. Both TD Ameritrade and E*Trade Report saw a 30% jump in activity in the first quarter; Schwab, which tends to me bore investor than trader focused, saw volume rise 13%.

Continues here

Category: Hedge Funds, Psychology, Short Selling, Valuation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

5 Responses to “It’s a Tech Bubble! Unless You Care About Earnings and Valuations”

  1. A says:

    The lesson: market predictions are a continuing process. And some will be proven accurate – eventually.

    Only the market will prove who is wrong and who is right. As for the bulk of ‘investors’ out there who possess no strategy, the market will also provide the appropriate punishment – eventually.

  2. boatdrinker says:

    I’m weary of the bubble mania, as well, but my takeaway from Einhorn’s missive was an opinion of bubble(s) in particular names, not all tech. I also didn’t get the feeling that he was bashing shorts.

    • neddyj says:

      I agree – I didn’t get the vibe that he was saying that the nasdaq 100 was a bubble or the dow jones internet index, which barry used for counter argument. seemed like he was calling a bubble in momentum tech stocks, and there pretty clearly is. TSLA, YELP, VIPS, FEYE.

      FEYE trades at 40 times sales now. yes, now that it’s 50% off the highs. and yes, that’s 40 times SALES. they lost $120 mil on $160 mil in sales. Which should I be looking at here – the earnings or the valuation?

      I think ‘bubble’ gets overused too – but man, every time it gets mentioned people come out of the woodwork to point out the differences between whatever bubble is currently being spoken about and the tech bubble of 99-00. That bubble was tulip-mania historic. Plenty of other bubbles have come and gone – and not many in the history of markets could be compared to the internet bubble. It’s not a good yardstick IMO. You may be able to compare the real estate bubble to the tech bubble of 99, but hard to do it using stock market metrics since that bubble was in home prices.

  3. Futuredome says:

    Tech is at the base of a bubble. Gen X is the driver of demand and they want Tech…………Real Estate out(that is so Boomer)…………………….though my Mother spent 75000 on a home remodel um, oh the booming contractor business.

  4. rob in tennessee says:

    Those of us old enough to remember the mechanics of the tech bubble remember some key elements not present into today’s market:

    1. The familiarity of the term “cash burn” and the gains posted when it decreased from one quarter to the next.
    2. Squakbox screaming “QUALCOMM!!”
    3. The outrageous advertising dollars spent for a sock puppet

    Today’s market seems almost drab compared to the circus that was the late 1990′s. How many of us had friends that quit their jobs and day traded? How many do you have today?

    Tech is where tech is. It is at a semi-reasonable historical range, and considering the amount of cash STILL sitting on the sidelines, seems at worst a sideways play. Time will tell what the market will dictate, but the diminutive financial demographic of Gen X will not drive the market; their parents will for continue to do so for years to come. By all means, leave real estate, be more than happy to buy it at cheap sell off prices, since they aren’t making any more of that scarce commodity.

    What tech lacks is the “the next big thing”. Sure m2m is out there, cool electric cars, delivery drones, etc. But what tech did for the previous generation was drive personal productivity through the roof. We need that next big push. 3D printing isn’t it, at least yet, and that’s going to drive a lot of labor out of the picture if it does mushroom. Domestic energy could help, in all it’s shapes and sizes. China maturing into a consumer might help if they like American products and it would be nice to drag all that cash back home.

    If I were to worry about a bubble, it would be because of future taxation concerns taking money out of the market, and an unhinged weak dollar policy with no meaningful inflation just waiting to bite us with a correction. And 10 more years of accelerating socialism in the White House and legislative branch. Worry about capital flowing from the markets and into Obamacare. Worry about the education cost bubble we have grown and are getting near zero return for.

    Those can pop even the smallest of developing bubbles, if they really exist.