Yesterday I came across an interesting article about all of the upcoming dot com IPOs and thought it posed a great question to put to all of our Trader's Blog readers.
In case you're out of the loop, there are quite a few dot coms coming to the market including internet coupon giant Groupon, travel site Kayak, as well as social media megastars Facebook and Twitter.
Will this be a repeat of the dot com boom and subsequent burst of 1999 that lost investors millions. Have the dot coms (and investors) of the 21st century learned their lesson? Will you invest?
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As always, feel free to leave your comments below.
Jeremy
On behalf of the MarketClub Team
In the dot com era, Wall street took public 100 companies in a product space, whereas before this era, they might take 10 companies public in a new product space. Underwriters saw that the average investor demographics had changed from white-collar educated male to everybody from truck drivers to housewives buying stocks on wild, unsubstantiated tips. The underwriters just cashed out within a few months of the stock run up, and left the public holding the bag.
Facebook looks to be a real game changer and will challenge google's hedgemony. Twitter, not so sure. Kayak--a nice discount travel site, whatever.
I dont think we have the makings of a dot bomb today as of yet. The green technologies may develop into a bubble, if they can ever really gain momentum...not just yet. But I dont think the social media, so far have spun out of control.
I kind of thought that there would be a shift into tech for this current 3 year rally, and its kind of developed. But this rally is more like an "overbuy" everything, not just tech. America loves to gamble, just like China.
I’m impressed, I must say. Really rarely do I encounter a blog that’s both educative and entertaining, and let me inform you, you have got hit the nail on the head. Your thought is outstanding; the issue is something that not sufficient persons are talking intelligently about. I'm very happy that I stumbled throughout this in my search for something regarding this.
The NEW DEAL
If we look back to the Great Deppression, we can see a similiar weaknes today. Back then there was a maldistribution of wealth. The wages for workers increased by 8% in the 1920's decade, before the depression occred while the cost of living took the majority of their wages. The remainder of the profits went to the wealthy owners. So how could they sell their products. They came up with 'pay on installement plans' This worked for a while until the paycheck came around and now they payed for their needs food etc and now a paynment for their new fridge and radio and Model T and nothing left so inevitably it reached a point sooner rather than later that the workers bought no more product, they paid for the nessasary things, made their payment and bought nothing else even if they could. Now again there was a inabiltiy to sell the warehouse full of items. Due to the increase in production because of new assembly line practises and then modern equipment they were producing products faster and had no one to sell them to. Lay off started causing even more people unable to buy and now even to payoff loans and once that ball got rolling ... Because the maldistiribution of the wealth. The wealthy could not sell their product.. Sound familiar...housing collaspe? Sending all our manufacturing jobs to China and now the higher paying manufacturing jobs are gone, people unable to pay debts,layoffs. It is a similar outcome though differing circumstances .today it is a malinvestment problem because of fake money{fiat} ,easy credit and so on,.we are facing the consequences now Like I said in previous blog, this time they can print their way out of it. Next time ...NO ...coswil
We have to come up with some kind of boom, in order to 'fix' the fact that we exported most of our industrial base with the insane 'low-cost solution'. The reason why gold and silver are going 'up' is because with endless 'qualitative easings' our currency is fast becoming worthless, along with the Fed, which balance sheet now resembles Fannie Mae. Doesn't hurt that China is encouraging its citizens to buy gold and silver, either.
Good luck (NOT) to JPM and company, with their naked shorts on a year's global silver production.
"Do any of you clowns realize that gold and silver have been in a bull market for 12 years running now? You’ll get in close to the top most likely."
or like most loose most of gains by holding on to a decline that will come fast and furious
Ask yourself why are people in gold.They only value gold holds is it is a safe haven. With the economies as they are and the huge money supply inflation gold is a safehaven. But as was pointed out they meaning federal reserve can print themselves out of this mess..THIS TIME... It is the next collaspe that will be catrostophic. Each bubble the fed created ittakes more money created at a faster pace to encase the previous bubble. The next one is the bubble that will not be able to to patched by printing money. Now if the reason majority of people are in gold is because it is a safe haven for this time period of unrest, what will happen to gold when they are able to patch this mess and reinflate the monetary system. People will leave gold and start reinvesting their money into growth entities, when it is safer. Gold will tank until the next collaspe. This is not a gold standard market The world is tied to a fiat currency and that is just the way it is. Whenit is safer to get back in pool, people will. There is no other reason for the value of gold as it is except it is a safe haven from the inflationary fear that is still here. By next year things will begn to improve dramitically, by 2014 a recovery will be in full swing, where will gold be then. ...down...coswil
Doug Coulter, you rock, you are totally cool with your fusion thing and that great beard. I'm a fan!
Do any of you clowns realize that gold and silver have been in a bull market for 12 years running now? You'll get in close to the top most likely.
MCP probably dropped because it itself was in a bubble, no way they have the value to back what the price was -- all negative numbers on the balance sheet. For now, it's not an investment unless you have a very strong stomach, but if you're a good trader, it's a lotta fun -- I've done well taking both sides of it myself. Be patient on that one, buy low, and wait, or do like I do and just trade it for the crazy swings. That's about my limit of beta that I feel OK with, and I'd never bet the farm on that one or anything like it.
Though I don't like that use of the word bubble -- to me, a bubble means overuse of leverage, so when it pops, the damage is larger than the real investment. It's having to pay back borrowed money when the thing you bought with it loses value that defines bubble for me personally. If people just lose money, well, they just lost money, but it was money they actually had -- if it was borrowed, it's far worse -- that makes a claim on money they don't have (yet, and maybe never). Can you tell I'm not a fan of borrowing money? I got laughed at for years for not doing so, and "living beneath my means", but now I'm rich and most of those who laughed are not.
I don't plan to invest in any of the names above, because I see no investments there, or in nearly all the rest of the markets, just trades. Nothing in this world is at a point right now where you can put things on autopilot and wait -- you have to be nimble and actually earn your money (a novel concept to all too many people). It's debatable if things every really were that stable, other than some long runs of dumb luck. I don't think any of these guys are the next google, and that going public will actually signal something closer to the end of their success, rather than the beginning.
overhyped, overvalued, and funded indirectly via Fed free money. Worse yet, all reliant on advertising revenue - and the expectation that advertisers will kepp paying enormous sums for questionable results - can you say tulip mainia?
if with any, I would go with groupon, it's a very innovating idea and it will affect positively (if it works) the economy on a micro level (family level), could boost sales at retail and is a field that has not been exploited yet; why not facebook? to my knowledge, it's a phenomena that bursted a couple years ago, it's not news anymore and besides the amusement factor, it doesn't impact economy directly (of course, wonderful marketing channel, but anything else... sorry FB fans!:)
How do any of them make any money? other than selling advertising? I think they are a waste of time and don't use them at all... and will be listed at ridiculous P/E ratios with absolutely no hard assets, so you will be paying a lot for "goodwill" which is basically fresh air.. these will be speculators picks not investors...
Excuse me. This is more about the insiders getting their money out before the market collapses along with the dollar. They have a lot to get out so it will take months. Bag ladies welcome. Good luck and enjoy the ride.
Can anyone find a news event that caused the MCP drop? I can't. Did you see the article Friday (Engineer Broker)that predicts that MCP will not post the expected .10c loss, but will in fact surprise with a .09c profit for the Q4. If he's right this presents a very intriguing opportunity.
Read recently that Stocks are scarier than Options. And it really does look that way.
Going All-In on the Options.
The reason the dot com bubble burst was because it was at the end of an over heated inflation cycle that the fed had created. That overheated cycle began when Greenspan flooded the market after the 1987 crash. Internet was in a infancy stage, still is the same in some respects, but we are begining to come off a deflation stage and the inflation we are about to face from uncle Ben will find it's way into another malinvestment bubble. That is troubling in itself because this bursting of the next bubble will be the mother of all mothers and we will not be able to print ourselves out of it this time. People will behave like lemmings all the time, Gold is in a bubble and everyone and their brother is screaming gold gold gold, what would you expect is going to happen in the near future, What happened to the housing bubble, up until the rains came majority kept piling on,paying no attention, taking no note. The dot com is differant this time but the same at the same time. The internet has mature somewhat , but if easy money is available and an easy way to make it the lemmings will pile on.It is like trying to predict a head and shoulders pattern, You can guess before the pattern is complete and be wrong a good deal of the time or wait until the pattern is done then analize...just my opinion...coswil
Your question is not relevent. Small investors do not get an opportunity to invest in IPO's. However some become great trading opportunities when options become available.
FAMILIAR WITH THE USUAL FACEBOOK, TWITTER AND GROUPON. IT SEEMS THAT WHEN THESE DO BECOME PUBLIC AND ARE LISTED, THEY ARE USUALLY SO OVERPRICED IT MAKES IT DIFFICULT TO GET VERY EXCITED ABOUT BEING ABLE TO PARTICIPATE WITH ANY SORT OF VOLUME. BIGGER PLAYERS PARTY, NOT MUCH FOR THE LITTLE GUYS.
jpm wont let us investors in on facebook. also if skype comes ipo it will rock
Anything that relies upon the public 100% for its revenue stream such as retail and these dot com thingies is subject to the whims of said public. The public can be notoriously fickle, especially as technology changes. A good example of this is the old video stores. They are having to struggle to find new ways to entice customers into their web (pun intended). I prefer investments that have some staying power and have contracts with their customer base. However as Christopher D says they might make good securities to mess with and flip (aka buy low/sell high)lol.
Actually, since I am not an investor, I should not have voted.
I think facebook is an over exaggerated project. When I log into facebook (and that too once in a blue moon), my objective is to connect with other people. It never even occurs to me to shop or look at ads. And I think most users have a similar perspective. Hence I do not see facebook making it big in terms of advertising. Google is the superman and will remain.
Groupon is a good concept and may do well unless Google comes up with something similar.
No, I don't think these are dot com type companies. They have real earnings. Dot com companies had no earnings.
Facebook and Twitter are both well known internationaly and will both make good investments, offering excellent trading opportunities, I would expect them to eventually be bought out and taken over by either msn or google. I don't really know enough about either Groupon or Kayak to comment.
In 2001 the sp of any company that went on the internet with a website immediatly shot up, even though they wern't at that time able to make money from it, a lot of traders made a fortune from them, smart traders also made money in the subsequent bust selling short. Facebook, Twitter etc are already well established expanding internet companies making huge profits, the same pitfalls don't apply.
MCP, What happened?
Websites come and go. But hard assets are forever...
Just like any other sector. Some will suceed and some fail. I imajine the initial hype around the Facebook IPO will allow traders of all styles many chances to profit.
Either way it It will be exciting . I do think traders will be bullish on both twitter & facebook but Facebook CEO is so young. Does he have the life experience to do the right ting for shareholders.
I won't invest in any of 'em, but I will trade all of them.
Correct me if I'm wrong but rarely if ever do IPO's trickle down to a small retail investor. Most houses can ask for units but just don't get what they'd like to have so subsequently agents gobble them ALL up.
I will invest in Facebook.
Internet companies make money through advertising and nowadays they have become global. Thus there is not much risk exposure as in 2001. It's like having a billboard in every country, Facebook is a global site and it is the leader.
These are all well-established big names. The risk comes when tiny-cap companies start releasing IPOs.