An Evolve-or-Die Moment for the World's Great Investors

[stahleyp]

“Bailing out” an economy us very different than bailing out specific companies. Investors in overvalued tech companies were never bailed outend neither were employees who lost their job.

 

I agree. I think they both are forms of corruption though.

[Mondegreen]

I think this thread has outlived its usefulness

[stahleyp]

I think this thread has outlived its usefulness

 

Nothing wrong with a good debate. ;)

 

I actually like having my views challenged.

[DanielGMask]

Dropping interest rates is a far cry from “not letting the innovators fail”. Please try to find the tech equivalents of AIG and GM to back up your argument because so far, you have no argument. Aside from Amazon, none of the FAANG stocks were big names (or even born) as of 2001. Your bailout of 2001 argument just doesn’t work—last I checked, Pets.com and AOL were total failures and the government did not get “involved” to prevent their failure (among many many other tech names in the graveyard from that era).

 

None of the faang stocks were born as of 2001 besides Amazon? Apple has been around for decades (publicly traded).  Google was founded in 1998 and Netflix in 1997. So the only one that wasn't "born" was Facebook.

 

Let's assume that interest rates didn't drop in 2000-2002 (from a high of 6.79% to 3.61% in 2002.). It's probably safe to assume the market wouldn't have hit a new high so quickly (the market recovered from a 50% drop in roughly 6 years). If the market didn't recover (and people were still licking their wounds) it's plausible, if not likely that the most of the faangs wouldn't have received the venture capital that they did and wouldn't be around today. How's that not a bailout?

 

This line of thinking is completely wrong! The correct way is clearly stated by Spekulatius: “Bailing out an economy us very different than bailing out specific companies. Investors in overvalued tech companies were never bailed outend neither were employees who lost their job.”

 

FAANG stocks are creating a lot of jobs and innovating in many fronts. If what FAANG offer is not of use or if there’s is something better out there, users will vote stop using their services without the need of governments telling/helping them to do so, but if users like the service then no matter what they will keep using it, and that’s exactly what defines a free market and what makes the US such a strong economy.

[stahleyp]

Dropping interest rates is a far cry from “not letting the innovators fail”. Please try to find the tech equivalents of AIG and GM to back up your argument because so far, you have no argument. Aside from Amazon, none of the FAANG stocks were big names (or even born) as of 2001. Your bailout of 2001 argument just doesn’t work—last I checked, Pets.com and AOL were total failures and the government did not get “involved” to prevent their failure (among many many other tech names in the graveyard from that era).

 

None of the faang stocks were born as of 2001 besides Amazon? Apple has been around for decades (publicly traded).  Google was founded in 1998 and Netflix in 1997. So the only one that wasn't "born" was Facebook.

 

Let's assume that interest rates didn't drop in 2000-2002 (from a high of 6.79% to 3.61% in 2002.). It's probably safe to assume the market wouldn't have hit a new high so quickly (the market recovered from a 50% drop in roughly 6 years). If the market didn't recover (and people were still licking their wounds) it's plausible, if not likely that the most of the faangs wouldn't have received the venture capital that they did and wouldn't be around today. How's that not a bailout?

 

This line of thinking is completely wrong! The correct way is clearly stated by Spekulatius: “Bailing out an economy us very different than bailing out specific companies. Investors in overvalued tech companies were never bailed outend neither were employees who lost their job.”

 

FAANG stocks are creating a lot of jobs and innovating in many fronts. If what FAANG offer is not of use or if there’s is something better out there, users will vote stop using their services without the need of governments telling/helping them to do so, but if users like the service then no matter what they will keep using it, and that’s exactly what defines a free market and what makes the US such a strong economy.

 

I don't think my thinking is wrong on this but could be. If interest rates didn't drop (primarly due to the waste of tech companies) would they have survived (especially since the hurdle rate of venture capital firms would have been higher)? If the Fed didn't reduce rates, would houses in SF be worth so much more than most of the country?

 

I'm not saying that tech companies don't add value. In fact, they are add a ton of value for investors (few employees, monopoly power and asset light!)

 

If they work it out, autonomous cars is huge benefit to society. Being addicted (engineered that way, mind you) to be addicted to your phone, instead of spending time with your kids? Not a net benefit to society.

 

https://www.nytimes.com/2018/10/26/style/phones-children-silicon-valley.html

 

 

 

 

[Dalal.Holdings]

Dropping interest rates is a far cry from “not letting the innovators fail”. Please try to find the tech equivalents of AIG and GM to back up your argument because so far, you have no argument. Aside from Amazon, none of the FAANG stocks were big names (or even born) as of 2001. Your bailout of 2001 argument just doesn’t work—last I checked, Pets.com and AOL were total failures and the government did not get “involved” to prevent their failure (among many many other tech names in the graveyard from that era).

 

None of the faang stocks were born as of 2001 besides Amazon? Apple has been around for decades (publicly traded).  Google was founded in 1998 and Netflix in 1997. So the only one that wasn't "born" was Facebook.

 

Let's assume that interest rates didn't drop in 2000-2002 (from a high of 6.79% to 3.61% in 2002.). It's probably safe to assume the market wouldn't have hit a new high so quickly (the market recovered from a 50% drop in roughly 6 years). If the market didn't recover (and people were still licking their wounds) it's plausible, if not likely that the most of the faangs wouldn't have received the venture capital that they did and wouldn't be around today. How's that not a bailout?

 

This line of thinking is completely wrong! The correct way is clearly stated by Spekulatius: “Bailing out an economy us very different than bailing out specific companies. Investors in overvalued tech companies were never bailed outend neither were employees who lost their job.”

 

FAANG stocks are creating a lot of jobs and innovating in many fronts. If what FAANG offer is not of use or if there’s is something better out there, users will vote stop using their services without the need of governments telling/helping them to do so, but if users like the service then no matter what they will keep using it, and that’s exactly what defines a free market and what makes the US such a strong economy.

 

I don't think my thinking is wrong on this but could be. If interest rates didn't drop (primarly due to the waste of tech companies) would they have survived (especially since the hurdle rate of venture capital firms would have been higher)? If the Fed didn't reduce rates, would houses in SF be worth so much more than most of the country?

 

I'm not saying that tech companies don't add value. In fact, they are add a ton of value for investors (few employees, monopoly power and asset light!)

 

If they work it out, autonomous cars is huge benefit to society. Being addicted (engineered that way, mind you) to be addicted to your phone, instead of spending time with your kids? Not a net benefit to society.

 

https://www.nytimes.com/2018/10/26/style/phones-children-silicon-valley.html

 

Lol... I agree with Mondegreen.

 

As I said “none of the FAANG stocks were big names (or even born) as of 2001”. I didn’t claim all except amazon did not exist. Google and Apple were small potatoes in 2001 (Apple almost went broke in 97-98, Google wasn’t even public and nothing compared to Yahoo). Netflix and FB did not exist. To argue that the gov’t made these successes and “bailed out” tech is ridiculous.

 

Finally, low interest rates would not benefit asset light tech companies as much as capital intensive industries.

 

Anyway, the usefulness here is outlived. Your arguments keep changing and it’s like a pointless game of whack-a-mole...

[stahleyp]

I would assume born and existing are more or less synonymous but who knows.

 

For the record, Netflix was founded in 1997.

 

https://qz.com/1062888/netflix-was-founded-20-years-ago-today-because-reed-hastings-was-late-a-returning-video/

 

"The fact is that on August 29, 1997, the company was incorporated in the US state of Delaware. The US-based video business was called Kibble, before the name was changed to NetFlix.com, and later Netflix. It began renting DVD rentals by mail in April 1998, and introduced its subscription model the following year."

 

I will agree that the arguments have changed a bit though. But, I'll still contend that if we had a more "just' Fed that the major cities, while would be quite nice, wouldn't have nearly the wealth they have today.  It reminds me of this article:

 

https://www.pbs.org/wgbh/frontline/article/how-struggling-dayton-ohio-reveals-the-chasm-among-american-cities/

 

"In 1980, even after the first wave of deindustrialization, Middle American cities such as Dayton were remarkably close to par with their coastal peers. Per capita income in the Seattle area was only 16 percent greater than in the Dayton area. In metro Boston, the edge was only 6 percent. In New York, 14 percent. In Washington, 31 percent. And in the San Francisco Bay Area, 33 percent."

 

Ironically, that's when the government started running up huge deficits.

 

For what it's worth, I do appreciate you guys challenging me. Days spent with 2 year old and 3 month old are long and I can only sing "5 little monkeys" so many times a day. Sorry to salty for derailing the thread a bit by the way.

[rkbabang]

What’s happening now is a debate about what the drivers of value are—of what constitutes value in the 21st-century economy—and what will drive both the economy and the market forward over the next generation.

 

This is the key questions. IMHO there are only so many intangible asset driven companies that society can handle. By that I mean, there can't be 100 Netflix clones, and nobody to produce TV shows and movies.

 

But Netflix does produce TV shows and movies... a lot of them.  A Netflix "clone" who doesn't produce TV shows and movies isn't really a Netflix clone is it?  Such a "clone" is simply a streaming service, not a media company, and probably shouldn't be compared to Netflix at all, never mind be called a "clone".  I don't envision there ever being 100s of true Netflix clones each producing billions to tens of billions of dollars per year of new content.

 

[LC]

It was just an example. The question is really, how many intangible-driven companies can a society manage without owing hard-asset driven businesses.

 

Will we all be Facebook employees, importing our cars, clothes, and food from Mexico? Has the balance permanently shifted towards the FAANGs of the world, or is this temporary?

 

As the initial question asks, "what will drive both the economy and the market forward over the next generation."?

[perulv]

One major difference is that it seems that unlike in 2000, Warren Buffett has jumped into tech this time (he largely sat out of it back in 2000). I think that's a significant difference and indicates a real change afoot. The network effects of FB, the moat of Alphabet, and the ecosystem/halo of Apple products is unlikely to disappear overnight like the popularity of tech companies circa 2000. These companies are producing real profits this time--and at high margins and asset light rates. Sure, competition will enter and disrupt, but tech in general is here to stay (and is embraced by mass market consumers now).

 

This. If you can buy shares in a company that have "real earnings", high margins etc, at a price below what you believe it is worth, that's value investing, isn't it? If that happens to be a "tech company" or not, so what? As more and more routine work are replaced by software, more businesses will become "tech" in some way. That a tech-company can be asset light, require little debt, and have high returns make them great potential value investments, imho. Some will be over-priced, some will under-priced, just like any other company. The value investing "tools" still apply, it's just that more of the companies that provide value are "tech".

 

[stahleyp]

https://www.cnn.com/videos/business/2018/12/17/tim-wu-this-is-how-you-break-up-facebook-orig.cnn-business/video/playlists/business-facebook/

 

 

This is timely. I know, I know. The world will end if monopolies are broken up.

 

 

The hits just keep coming!

 

https://www.cnn.com/2018/12/19/tech/facebook-user-data-big-tech-companies/index.html