| The Tech Bubble Party |
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| Friday, 15 July 2011 04:31 | |
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Lately we’ve been reporting on a possible 21st century tech bubble. So far, what we’ve heard has only been speculation with lots of observations being made by those who can’t seem to agree on what it is, or even if it is. But when a group decides to pull a bunch of Internet “experts” together to host a round table called, "Tech Bubble: Party like its 1999... or not? " it seems like somebody is taking this whole thing seriously. In the late 90s, after building entire online empires with investor funds, many Internet moguls lost everything – the businesses and just about everything they owned, not to mention the millions of hopefuls who watched their personal stock portfolios evaporate. Now some are wondering if we are looking at dot.com version 2.0 and asking if these new start ups are built on better foundations and technologies than the 90s version. The Tech Bubble roundtable, which took place this week, explored these questions and the whole subject of what happens when valuations become completely disconnected from reality. The general consensus was pretty much what we’ve been writing about: a lot of money is getting sucked into various social media and tech company IPOs by two kinds of people—those that know how to make a fast buck, and those who are not asking the right questions about the intrinsic value of those companies. How much is a lot of money? Venture capital raised for Internet start-ups is currently up 72 percent from last quarter, or 2.6 billion funding a total of 275 new companies. That looks like a lot of venture capital money in a short amount of time to be funding a particular sector of the market. But looking at this from a different perspective, if there were no bubbles, there may very well be no venture capital industry—a concept similar to what we stress in our bookThe Big Gamble, Are You Investing or Speculating? If you’ve read the book, you know that we point out the difference between investing and speculating with the intention of making people more aware that they are never investing, they are always speculating. We give plenty of warnings about the worst that can happen when you blindly follow the herd toward impossible dreams. After all, if Bear Stearns, and Lehman Bros. can go under in a flash, then can anything really be considered stable? But along with the warnings, we also give case studies about the important role speculators play in a building our economy and creating jobs. Therefore, speculation and bubbles are not necessarily bad things. The question is, are you informed enough to make smart decision about where to put your money? For those anxious to jump aboard this latest IPO and tech stock frenzy, remember two points:
Most of all, remember that those mega-billion IPO prices you read about are what big institutions and insiders pay. You, as a relatively small investor/speculator will probably be feasting on the leftovers—whatever is available on the secondary market weeks after the initial offerings when insiders have already dumped their overvalued shares. Before you consider getting in on the latest tech stock boom, here’s a recommendation to help clear your head of that seductive euphoria: readThe Big Gamble, Are You Investing or Speculating? It’s sure to give you a more balanced outlook and some reasonable expectations. |
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