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OMG THE TECH BUBBLE SKY MAY BURST - a discussion - Page 2

post #16 of 36
Quote:
Originally Posted by LA Guy View Post
 

While I am not sure how big the bubble is, I am sure that there is one, and that we are in one now.  

 

Just looking at all of the tech fashion startups for men, and even accounting for the overall growth in menswear, I see a few issues:

1) Some of the ideas are really, really, dumb, and ignore things like "human nature" and "physics".

2) The pace at which there are new companies is outpacing the incremental increase in the demand for menswear

3) With more and more companies competing in the same sector, the bets investors are making are increasingly long, so it will become increasingly difficult to win.  

 

As for "experts", I'm typically not that impressed, mostly because a lot of them don't take do enough groundwork, and/or rely on reports and standard metrics about a company rather than really understanding the meat.  For example, imo, if you are not interested in clothing, you are much more likely to not see the glaring issues with a company that sells clothing.  

 

While I agree there is a bubble, rapid activity in a sector isn't a bad thing.  Economic theory hinges on the idea of competition; it would be much much worse for the sector if a few fashion houses dominated the market and colluded to influence prices (like the big 5 sort of did 30 years ago).  All these start-ups restore (economic) sanity to pricing models; there is a lot more pressure on the established houses to either amp up design (allowing them to jack up prices or claim a differential of some sort over start ups) or to bring down costs (which is happening as designers pump out essentially two tiers of stuff).  The market is becoming more efficient and more alligned to consumer tastes, whether thats quality or design or brand name bling bling. 

 

On the other hand, competition fundamentally relies on human misery.  Someone out there has to fail to make the market more efficient.  Even dumb as hell start ups contribute some metaphysical value to the market as it more clearly delineates where the market is.  Sucks for them, but its better for the rest of us.  A bubble occurs when reality is uncoupled from pricing models.  In my opinion, we are starting to see that in certain area's of Menswear (Alden Indies are selling for like, $200 more than they did years ago.  Shell prices are going through the roof.), but I feel that the overall market for menswear has gotten better in terms of variety and quality. 

post #17 of 36

(not really responding to your comments but all of it in general).

 

It's just really sad that money gets pored into some ridiculous startups that has proven little worth. Or ones that really don't even have much originality to what they build, just re-marketed. Or when the start up owners' profiles are blown up in media with press.  Money gets wasted. 

 

Even just researching the kickstarters while prepping, I see ones getting ridiculously over valued--not just by backers and press doing, but the creators too--they over inflate their work "the best ...". And then the projects failing completely, it's money burned.  Even when they deliver--when it doesn't work or fit and basically goes to the trash.  I know that's some what expected but when the projects over inflates and it's like.. a million dollars burned... I wish that money be given to the small local businesses that are not doing anything new, but just humbly trying to provide something of value.

post #18 of 36
Quote:
Originally Posted by Mehran View Post

While I agree there is a bubble, rapid activity in a sector isn't a bad thing.  Economic theory hinges on the idea of competition; it would be much much worse for the sector if a few fashion houses dominated the market and colluded to influence prices (like the big 5 sort of did 30 years ago).  All these start-ups restore (economic) sanity to pricing models; there is a lot more pressure on the established houses to either amp up design (allowing them to jack up prices or claim a differential of some sort over start ups) or to bring down costs (which is happening as designers pump out essentially two tiers of stuff).  The market is becoming more efficient and more alligned to consumer tastes, whether thats quality or design or brand name bling bling. 

On the other hand, competition fundamentally relies on human misery.  Someone out there has to fail to make the market more efficient.  Even dumb as hell start ups contribute some metaphysical value to the market as it more clearly delineates where the market is.  Sucks for them, but its better for the rest of us.  A bubble occurs when reality is uncoupled from pricing models.  In my opinion, we are starting to see that in certain area's of Menswear (Alden Indies are selling for like, $200 more than they did years ago.  Shell prices are going through the roof.), but I feel that the overall market for menswear has gotten better in terms of variety and quality. 

I don't think that menswear is in a bubble. It think that tech is in a bubble. I used fashion tech startups as an example because it's an industry I actually know about. I look at the revenues of actual stores, including but chains, and there is essentially no way that most of these fashion tech startups aren't over valued.
post #19 of 36
When you guys talk about "tech", it isn't monolithic. FB, Goog, Microsoft, Apple aren't gonna go anywhere. Amazon, arguably, is a bit at risk if there's another downturn because their ability to scale out AWS requires so much capex. These companies are so intertwined with life world-wide and they have billions in the bank.

The companies at risk are the start ups and really it's the second tier startups, the one who won't ever be a billion dollar company (certainly not a ten billion dollar company); it is the companies who are trying to earn a couple hundred million per year (Hi Twitter!) who will fold and/or fail to get funding if another downturn hits.
post #20 of 36
Quote:
Originally Posted by msg View Post

FB, Goog, Microsoft, Apple aren't gonna go anywhere. 

How can you say that? There are plenty of billion dollar tech giants who are no more/ are greatly diminished.

post #21 of 36
@venividivicibjThere's a world of difference between a company that's a billion dollar revenue (or whatever) and someone like MSFT or Apple who have $50 billion in cash in the bank. Sure, over 15 years, these companies may diminish but a recession or a bubble won't put them out of business. Also, don't confuse VC valuation with real revenue when you're trying to draw an analogy to past failures
post #22 of 36
I'm not (was thinking of yahoo). My main point was that, while these guys are giants, and Apple may have 60BN in cash or whatever ATM, but in tech if you stop innovating, you get passed real quick (Ex -MySpace)
post #23 of 36
MySpace is not analogous to any of the tech companies that actually make stuff, like Apple or MSFT. The service companies like Goog or FB are conceptually "closer" and maybe more precarious because they're dependent on clicks and likes, but their momentum and inclusion in daily life is unprecedented. They have so much money available to them. The mistake people make it to assume that Goog or FB are models of sucess for other companies; they are not, they are exceptions. Similarly, Twitter will never be a $10 billion company, but it is massively successful compared to everyone else around it. The fundamental mistake is to believe these companies are models for sucess; they are exceptions. As for Yahoo, look how long it's taking them to fail: over a decade.

The argument above is that a tech bubble will cause problems for the industry. That's simply not true in general. Yes, the smaller tier companies will hurt, many will go out of business, but the big ones will be just fine. Innovation is important, critical even, but if you understand the financials of these companies and how tech had become so entrenched in life and, more importantly, business you'll understand that there are very few past analogies that hold when taking about be big companies. DEC is the closest example, but the world is widely different now, as are the financials. So it's a poor analogy at best.

Software is eating the economy and will continue to do so, across bubbles and recessions. Some guy in a past discussion was trying to reduce tech to a bunch of people building apps, that's a mis-understanding of what the industry is and how people and business use tech and where the money is; there's no fucking app for AWS.
Edited by msg - 4/16/16 at 9:35am
post #24 of 36
I was thinking the same thing initially but realized msg talking about very short timelines. Sure over half a century almost 90% of Fortune 500 companies have disappeared but most of that didn't happen in the span of a night. Some miscalculated steps led to bad business decisions and probably much slower deaths than small recession-hit companies.
post #25 of 36
Ah okay - I was thinking along the same lines as you shah.
post #26 of 36
Quote:
Originally Posted by msg View Post

Warning: Spoiler! (Click to show)
MySpace is not analogous to any of the tech companies that actually make stuff, like Apple or MSFT. The service companies like Goog or FB are conceptually "closer" and maybe more precarious because they're dependent on clicks and likes, but their momentum and inclusion in daily life is unprecedented. They have so much money available to them. The mistake people make it to assume that Goog or FB are models of sucess for other companies; they are not, they are exceptions. Similarly, Twitter will never be a $10 billion company, but it is massively successful compared to everyone else around it. The fundamental mistake is to believe these companies are models for sucess; they are exceptions. As for Yahoo, look how long it's taking them to fail: over a decade.

The argument above is that a tech bubble will cause problems for the industry. That's simply not true in general. Yes, the smaller tier companies will hurt, many will go out of business, but the big ones will be just fine. Innovation is important, critical even, but if you understand the financials of these companies and how tech had become so entrenched in life and, more importantly, business you'll understand that there are very few past analogies that hold when taking about be big companies. DEC is the closest example, but the world is widely different now, as are the financials. So it's a poor analogy at best.

Software is eating the economy and will continue to do so, across bubbles and recessions. Some guy in a past discussion was trying to reduce tech to a bunch of people building apps, that's a mis-understanding of what the industry is and how people and business use tech and where the money is; there's no fucking app for AWS
.

Completely agree with you about the big companies being exceptions. My concern is more centered around startups and ones that ended up being a bust in their IPO (groupon comes to mind). The companies that went bust in the IPO didn't close shop but they aren't successful either. Once those fall they'll hurt a bit but definitely won't slow down the economy. What will is a big outside factor that @LA Guy was talking about. Once that happens the smaller start ups and bust ipos (sorry don't know what else to call em) will pull some things down.

I hope the Big tech companies will just react and swoop everyone up through buy outs.

Honestly who the F knows but when things are going so well they are bound to have a correction, the questions is not necessarily when but how big will this correction be. And mind you correction is not a recession.
post #27 of 36

I see that @sinnedk beat me here by a second.  Well, I'll move his post here.

post #28 of 36
dammit we are in a new thread now ....
post #29 of 36
Quote:
Originally Posted by sinnedk View Post

dammit we are in a new thread now ....

Shit happens.

 

Incidentally, I would agree with the big 5.  But that is literally 5 companies (maybe add a 6th,) and even those have fundamental issues.  Google's core proposition, for example is that better data analysis will make it's advertising offerings better.  This is really a statement of faith rather than of fact.  No, it will not go belly up if there is a bubble burst, but the mystic that sustains it may be gone.  And if anything happens to google, entire industries will feel it, hard.  

post #30 of 36
Shouldn't this thread be in CE. alien.gif

Quote:
Originally Posted by msg View Post

When you guys talk about "tech", it isn't monolithic. FB, Goog, Microsoft, Apple aren't gonna go anywhere. Amazon, arguably, is a bit at risk if there's another downturn because their ability to scale out AWS requires so much capex. These companies are so intertwined with life world-wide and they have billions in the bank.

The companies at risk are the start ups and really it's the second tier startups, the one who won't ever be a billion dollar company (certainly not a ten billion dollar company); it is the companies who are trying to earn a couple hundred million per year (Hi Twitter!) who will fold and/or fail to get funding if another downturn hits.

You can't put Apple into the app/tech bubble equation, as they sell physical products, unlike companies like fb, instagram etc., so they are far less likely to be hit, if a tech bubble bursts, people will still need phones, computers etc.

Tech companies get sold and valued far above, what they ever will be able to earn and most have 0- little earnings even though they are valued at 10+ billion. As an investment those companies are bad business, it doesn't matter that everyone uses snapchat, whatsapp, instagram, twitter, tumblr, reddit etc., if they don't make money and if they don't create a yield for the investors they won't be able to get funding. Their main Achilles heel, is they only make money as long as they get traffic and clicks, if they get overly commercial the users will migrate. This is an issue for all online firms, the next big thing is able to kill you within months.

Regarding apps I firmly believe there is a point, where the market is saturated and the world only needs so many Übers. Speaking of Über a lot of the new apps/services operate in a legislative grey zone in most countries and as legislation catches up, some of them will decrease in value and even die, just see how many countries Über has been banned in and drivers arrested. There is also the elephant in the room called tax, should they be taxed in the country the app is sold or?

As I mentioned earlier the real issue is the Chinese economy and Russia, those two countries are far more likely to create a wide spread financial crisis and when the Chinese economy bursts it will hit everyone. The Chinese and foreign assets can very easily break real estate markets like NY, Miami, London, by having a fire sale to liquidate assets and then the snow ball is rolling. If Putin wins the election and keeps playing with his muscles he could easily start a war.

The big PE firms invest in cycles and in some markets, they have already halted real estate investments.
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