10 Aug
Posted by surya.yalamanchili as Technology, Business, Investing
I shudder to even write the words, but I have to wonder if another stock market tech bubble is forming. The last time we were here, at the end of the last/beginning of the current decade, everyone’s cash flowed into tech and telecom because it seemed like a sure thing. Exuberance all around. Today, the exuberance is missing– but the interest and attention remain. So what would trigger a tech bubble to form? Exuberance, yesterday. Fear, today.
I fear that an unattractive general securities market, driven by the sub-prime mortgage mess influencing everything from credit markets to (potentially) consumer discretionary income, will leave techs as the most attractive securities remaining. Most tech today is very attractive due to strong balance sheets (how different from last time, huh?) and lots of cash/free cash-flow, strong growth prospects, and potential cost-savings promises for business which would be very attractive in a depressed economic climate. If this is indeed the general perception of tech, as the general market drops, money could continue to flow into tech creating a bubble. Pure conjecture. And since I’m fully invested (and at that, almost completely in technology), I’m still not worried enough. But I thought I would share.

One Response
AradtheAlphaholic
August 13th, 2007 at 2:43 am
1There was a great paper that Eugene Fama wrote shortly after the tech bubble in response to his efficient markets theory that states bubbles aren’t bubbles at all: There is an unknown risk factor (an easy escape argument, in my opinion). Anyways, the idea was that even if a bubble has actually happened, the chance that people will over-indulge in a sector or industry will already be priced into those securities.
RSS feed for comments on this post · TrackBack URI
Leave a reply