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Wednesday, June 15, 2011

BUBBLE ON THE RISE?


Back during the days of the original dot-com mania, I was working in Menlo Park, right in the heart of the silicon valley. I distinctly remember feeling like a bit of an outsider. Hell, I wasn’t getting rich. What the heck were all these ‘geniuses’ doing that I wasn’t? Well all these years later I now know that a) I wasn’t an outsider, b) those ‘geniuses’ weren’t and c) all that bragging was just a bunch of hot air and d) I’m still not rich, but thankfully I’m not broke either.

Are we heading towards another tech bubble or have we learned our collective lessons from the dot-com disaster?

One has to wonder when the headlines shout with exuberance regarding the  IPO’s of Groupon, Facebook, Linkedin, Twitter, Zynga et al.  I mean, exactly how does one place a value on these social media companies?

If it does turn in to another bubble, what will the ramifications be for the country’s economy?

As I mentioned earlier, back in the mid to late 1990’s everyone was an investment guru, to hear them tell it. Regular working people who were planning their retirements, bragging about how much their stocks were worth. Well, we all know how that worked out. And yet here we are in 2011 getting all hyped up over the IPO’s of the social media sites.  I’m no expert in these matters but I still marvel at how the more things change, the more they stay the same.

I’m sure most of these businesses are more viable than say pets.com or webvan but are they worth the astronomically high valuations being bestowed on them

As the market continues to heat up it appears as though the surprisingly-high valuations being placed on several firms could easily translate into higher valuations for other social media sites.  In such  an enthusiastic environment you’ve got to believe that many other players are just chomping at the bit.  Eventually this will saturate the market(a la 1990’s)  and lower the values of all these firms in the long run.

When investors get excited a certain herd mentality seems to set it.  There exists an inclination to just rush out to grab the first available name, even at a steep price tag, just to claim status as a player in the market.

Only time will tell if these firms will become and remain solidly successful, and  generate solid profits or end up vanishing like many of their predecessors did years ago. Until then those involved with the upcoming social media IPO’s can only hope that investors keep the capital spigot wide open.






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