Do Big-Money Acquisitions Mean We're In a Tech Bubble? 266
Nerval's Lobster writes "When a major IT company pays a reported $30 million—roughly 90 percent of it in cash—for an iOS app with no monetization strategy and a million downloads since launch, is that a sign that the tech industry as a whole is riding a massive, overinflated bubble? Yahoo isn't alone, by a long shot: over the past couple years, a few apps have been snatched up for enormous sums—think Facebook's $1 billion acquisition of Instagram in 2012, or Google buying Sparrow for a reported $25 million. Nor has the money train stopped there: in a pattern that recalls the late-90s market frothiness for anyone over the age of 28, a handful of tech companies have either launched much-hyped IPOs or witnessed their share price skyrocket into the stratosphere. But does all this IPO activity and app-acquiring actually mean 'bubble'?"
yay for bubbles (Score:5, Insightful)
get it while the gettins' good, save the money - don't blow it, then get out
rinse and repeat, pt barnum was right
Yes, it's inflation driven (Score:4, Insightful)
Yes, it is a bubble, but it's not simply a tech bubble, it's money bubble this time. It's all inflation, people are looking for place to park value.
For all the Keynesians that deny one of the 3 major functions of money (storage of value), that's what you do when you print and print without regard to the actual purchasing power - you force people to look into alternative ways of storing purchasing power, and obviously with the interest rates being pushed down by this same action by the Fed and other central banks around the world, there is no yield.
Savers, investors are in a search of yield and they can't find it. That's how bubbles form. While the Fed is trying hard to reflate the housing bubble it doesn't really control what the inflation goes into and when it comes rushing out, so it results in higher stock market prices, higher asset prices that go up in bidding wars, whatever people can think of, anything that is not the paper printed by the central banks.
It will burst, what will be the second worst of the bad is unclear right now but the worst of the bad will be USD denominated debt, bonds, dollars themselves.
The obvious answer is... (Score:3, Insightful)
No.
Insane financial valuation theories mean we're in a bubble. Big money acquisitions can happen for a number of reasons. A lot of them are side effects of the insane theories. This one isn't.
They didn't pay $30 million for the App with no monetization potential, the second sentence of the first link is "Yahoo said it plans to close down the actual app and use the algorithmic summation technology". They paid $30 million for his algorithm and to hire the talented mind that conceived it. I don't know what's unique about his algorithm or it's results, but that's what the acquisition was about, not the app. Apparently it can do something Yahoo's wanted to do but was unable to accomplish. It may have been a bargain.
The first sentence of the summary contains a claim invalidated by the second sentence of the link. Seriously? Not even the submitter or the editor could RTFA?
Re:Bubble (Score:5, Insightful)
We've been in a bubble economy-wide since the crash of 2007. It's (more or less) intentional, fueled by artificially low interest rates and the Fed pouring money into the banking system. That money has no place to go, so it goes into whatever's trendy at the moment - whether there's real value there or not.
Everyone (again - more or less) agrees that the economy needed the stimulus, but a better approach would have been to pump the money into the economy via smartly targeted (or even non so smartly targeted) direct government spending. Funded, if possible, by new revenue streams themselves defined to have little effect on employment and other economic activity. But we don't have either a functioning market economy or a functioning democracy capable of managing the economy through the political system. So we go from bubble to bubble - or crash to crash, depending on how you view it.
Re:Yes, it's inflation driven (Score:4, Insightful)
There are no Keynesians. Keynesian's would run surpluses during good times.
Those who call themselves 'Keynesians' are just money printers who found an economic philosophy to act as a fig leaf.
Re:Acquisitions over Taxes (Score:4, Insightful)
It is in their best interest to take advantage of any loophole, just as normal people would go to a tax accountant to get the most money for our tax return. To do otherwise is silly. Do you really pay more taxes than you should?
If there are loopholes in tax laws, then our representatives should fix those. But our representatives don't represent us, they represent the corporations which spend money lobbying. Perhaps the Onion piece about America hiring a lobbyist is what we should do to get some representation...
Re:Bubble (Score:5, Insightful)
Re:What's a bubble? (Score:4, Insightful)
I saw the housing bubble. In 2006, specifically, when working as a programmer for a mortgage titling company. I just saw the numbers going into the database and realized that there's no possible way this could work in the long term - there were tons of refinanced loans for lower monthly payments that did nothing to pay back the principal, which more-or-less guaranteed that eventually the borrower couldn't pay.
I could see it, and I wasn't trained to see it or supposed to be looking for it. But it was there plain as day.
Re:30 million dollar purchase? (Score:4, Insightful)
People don't get how the truly rich work. They live by a completely different set of rules that even the rich wannabe can't comprehend.
Re:Yes, it's inflation driven (Score:5, Insightful)
Keynesian's would run surpluses during good times.
Yes, which is what Keynesian economics advocates. Also, these surpluses should be used to pay down debt that was accumulated during the last economic downturn or accumulated to make a rainy-day fund to shore up the economy during the next economic downturn or (and conservatives will be shocked by this) taxes be reduced so that there is no longer a surplus.
However, parent also seems to confuse what is recommended by Keynesian economists (who broadly believe these recommendations) and the actions of the politicians, who often ignore actual economists (of any stripe), which seems to be some odd tactic to discredit Keynesians simply because (just like most normal people) politicians don't listen to them.
Re:yay for bubbles (Score:5, Insightful)
Indeed. Looking at the college loan bubble...as well as the new real estate / mortgage bubble...I am without words. We just went through this not even a decade ago, so...why are we doing this again?
As for the 'tech' bubble...these are purely fluff acquisitions...good money paid for crap...that makes the original DOTCOM bubble look rock solid in comparison. I don't have the figures in front of me, but I've read some of this stuff recently...we're looking at paying premiums for companies in excess of their earnings for the next 50 years...many of them aren't even paying a dividend, so the only money that can be made is by selling it off to someone else who thinks it will go higher...or possibly someone who needs to claim a fictitious loss through some mystic means. Like Instagram, a number of these companies don't even seem to have anything resembling new technology.
From what I've seen, the heart wood of the tech sector has given out, and it appears to be shrinking. We're seeing a compacting of the tech sector, not new energy.
An easier way to chart things is to ask the tech sector "have your wages risen greatly, on average, in the past three years, allowing for inflation?" Find out which sector is seeing a rise in wages, either regional or global, and you'll know which one is currently enjoying a boom. Last I checked, which was a while ago, the Australian mining companies were doing pretty well here.