Nasdaq stocks look a bubble compared with gold producers
Posted on 24 November 2010 with 3 comments from readers
Facebook is not yet listed on the Nasdaq and still commands a private company valuation in excess of $40 billion, almost the same as the largest US-listed gold producer Barrick Gold Corporation, while Google at around $200 billion is worth more than all the top 20 US-quoted gold producers together.
Does this not make the US technology sector look something of a bubble in terms of gold? It is easy enough to see the value of a company with millions of ounces of precious metal in the ground, not so a social networking site with unproven advertising potential.
Google’s billions
Google is undoubtedly highly successful at selling Internet advertising but will it necessarily continue to grow in this space and keep its virtual monopoly? The tech sector is surely long on examples of companies with unassailable positions that eventually fell by the wayside. Technology always moves on.
Indeed, that is the point as far as many Nasdaq valuations are concerned. Companies like Microsoft are now in advanced middle age with old technology that continues to sell but it is hard to see Windows as the operating system of the future.
Not that those with newer technology are necessarily fairly valued either. Apple is also approaching the Google level of valuation mainly because customer enthusiasm for its new iProducts is equalled by over-enthusiasm for its share price. History has plenty of examples of retail investors getting this sort of thing wrong, and anybody who has queued for an Apple new iProduct ought to recognize the symptoms of a mania.
Nasdaq crash?
Could there yet be a final stage to this Nasdaq bubble, like in late 1999 to March 2000 when prices doubled? It is possible but does not seem very likely as the oxygen that has fueled the long stock rally since March 2009 is getting very thin.
Yesterday North Korea lobbed missiles at the South. Ireland’s debt solution looked in political trouble and likely to cause a banking crisis in Europe. The Chinese appeared to be tightening credit. And US stocks fell sharply.
Anybody trying to chase the Nasdaq bubble higher at this stage is likely heading for a nasty fall. Remember what happened to tech investors a decade ago. It may not be different this time.
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3 Comments posted by readers:
I don’t think so… Next week is POMO week with $6-8 billion per day and ComScore predicts 11% increase in Holiday spending this year which is the highest on record for some time being. With the above 2 in mind we continue to climb from here.
I’m in California this week away from Asia for Thanksgiving. Yesterday I was at the Mall and the Apple shop was packed with people. Black Friday is this week and it does look like some people are doing some shopping and spending. Apple and other retail tech stocks should rally into Christmas this year. Amazon and Best Buy should do well as well. Macy’s on the other hand looked pretty bad yesterday with nearly no shoppers inside shopping for clothes.
Want to get really rich? Buy Facebook, if it ever goes public at some reasonable price. Just look at a graph of Google, since its’ IPO. (I missed it because of Katrina destroying nearly everything I owned. Trust me, that isn’t something you want to experience.) A recent article, I think it was in the Wall Street Journal, said Facebook could eventually threaten Google! And you see that little Facebook symbol EVERYWHERE on the Internet. It will bubble WAY too high in the first few years. Then eventually flatten, but won’t blow up like most of the dotcoms did. (One of them went from around $50 to over $ 1,000 a share, and is still in business, but back down to near the IPO price. Some business software outfit, I think.) The fellow who founded Facebook just might become the world’s richest man. That wouldn’t surprise me one bit, because it could eventually have a couple of BILLION users. I get tired of seeing it pop up on my laptop screen. The beauty of it is that it isn’t all that dependent on the state of the economy. It is a social thing. People are, and always will be, social animals. How nice is it to be able to make money on that! Talk about genius. Eventually, something better might come along, but by then, you could make a killing, like the early Google investors did. From $ 100 to $700 in 4 years ain’t bad. I’m not saying Facebook will do that well, but it does have the potential to do it. It certainly won’t disappear, like most of the dotcoms did. WAY too many people are already on it.
Then again, I’m no Internet expert. And since I’m waiting for it to go public, it probably never will.
Notice that my comment above beat the article on Facebook inThe Independent by 1 day. (I just saw it reading about the euro zone debt mess, which looks very bad for next year. The Germans will end up supporting a lot of Europe. I would hate to be a German taxpayer.) Those Independent writers are reading your site, Peter. Half a billion users on Facebook already! It might just be the biggest IPO in history. They are guessing sometime in 2012. I wonder how many petrodollars will pour into it. Probably, a whole lot. Even Google, had to give their employees 10% raises to stop the Facebook brain drain. If Facebook doesn’t turn out to be a license to print money, I will be more shocked than when I realized that people in the USA will spend more for a bottle of water, than for an equivalent amount of gasoline.
Be very careful with Chinese IPOs. They just said on CNBC World that some are trading at 100 TIMES earnings. No, that is not a typo, although I make many. Can you say dotcom bubble squared?