Alright stop…bubble time!
I will now proclaim that we are in another tech bubble. Sure this is exciting but unfortunately when things fall, it’s going to fall hard. I was around in the 1999-2001 tech bubble when I saw stocks like ARBA fall from $1000/share to $5/share (split adjusted). I know because I owned ARBA shares. Yes, it was painful.
I also own AAPL stock today and sure, I’m happy that it’s trading in the $600+ range today. I bought when it was “only” $119. I didn’t buy too many shares (felt it was too risky) but I’m happy I did. But AAPL is now the most valuable company in the world. Yes, IN THE WORLD! AAPL is supposedly worth $600 billion. AAPL is worth more than the entire US retail sector! This basically means that if you take the value of every retail company in America – guys like Walmart, Target, Best Buy, Sears, Macys, etc. and add them all together, AAPL is more valuable on paper. No, it doesn’t make sense.
Most analyst say that Facebook is worth $100b. This is a website that you go to in order to share pictures of your kid(s), write about what you ate for lunch and “like” random stuff that your “friends” (reality: people you haven’t actually spoken to in a decade) post. No, it’s not worth $100b.
Instagram was purchased by Facebook for $1b. No, it’s not worth $1b.
But you know what? Unlike what everyone else in silicon valley is saying, I think it’s a pretty decent buy for Facebook. Facebook bought it for 1% the value of Facebook and I think Instagram is worth at least 1% of Facebook. I’d probably rather own 100 companies like Instagram than 1 Facebook if you ask me. $100b, $1b, etc. is all just play money at this point right?
So the billion dollar question is “when” right? When will this bubble burst? If I knew that, I’d be working on wall street. If any of you watched the movie “Margin Call”, you might recall this scene with John Tuld (Jeremy Irons).
JOHN TULD: Well let me tell you something Mr. Sullivan. Do you want to know why I’m sitting here in this chair with you all, why I get the big bucks, so to speak?
JOHN TULD: I’m here for one reason and one reason only. I’m here to guess what the music is gonna do a week, month, a year from now. That’s it, nothing more……. and I’m afraid… standing here tonight… that I don’t hear… a… thing… just silence.
So when? My prediction is that it will be 6 months – 1 year after the Facebook IPO. Beware. I said it here first.