Warnings of New Technology Bubble Set To Burst

[engine]

Warnings of New Technology Bubble Set To Burst [washingtonpost.com]

The valuations are inflated beyond reason, and there are clear signs of another technology bubble—just like the dot-com bubble, which, when it burst, caused an ice age in the technology sector. Venture capital firms lost significant amounts of money during that time, so they slowed down their investments. Technology companies were starved for financing, so they didn’t have the funding to bring their innovations to the markets. It took a decade for the technology industry to recover from the excesses of the era.

The problem is that both LinkedIn and Pandora are dramatically overpriced, and Groupon has an unproven business model. Yes, LinkedIn has over 100 million users and has about $250 million in revenue—so the company is for real. But profits are elusive. Will LinkedIn’s user base grow dramatically and will those customers turn into profits? I don’t think so. There are not enough professionals in the world who will want to network with each other to sustain the 100-percent-plus growth rates that would justify its over $8 billion valuation.

When this bubble bursts, it will freeze the opportunities for companies that are far more worthy, far more innovative, far more necessary for our economic growth than the ones that are currently reaping their fortunes. I fear it will set back the cause of innovation for another decade.

I just don't understand how the investors cannot see the folly. Perhaps they do, and they feel strongly they don't want to 'miss the next big thing.' Perhaps that's what drives them!

[SevenCubed]

To be able to get an understanding of how these cycles evolve we would first have to be able to be a fly on the wall in back-room meetings where deals are a-greed to.

Banks and brokerages are the engine, retail investors (public) are in the last boxcar, and insiders take turns being the caboose (ya know what I mean). Looks like right now it's Zynga's turn to be the caboose [webmasterworld.com...]

The catalyst that sets this bubble bursting in motion is going to be Facebook. My guess is we are probably 2 years away from it yet. When the quarterly numbers start becoming public knowledge as a result of Facebook being a public company investors will see the real value, not the hyped one. It may be a bit longer if they have really creative accountants.

[engine]

>where deals are a-greed to

lol

I really don't see how some of these current valuations make sense, and that includes FB.

What's also interesting, if you watched the video all the way through, was the thought that good companies may not get the investment they need. They need to jump onto the caboose before it starts hitting the hill.

[jecasc]

I just don't understand how the investors cannot see the folly. Perhaps they do, and they feel strongly they don't want to 'miss the next big thing.' Perhaps that's what drives them!

They all see the folly. However they are all hoping to be the one to sell when the bubble has reached it's biggest size, just before it explodes. They are playing "Musical chairs". Hoping they will be seated when the music stopps playing. If they win they will get a fat bonus. If they loose, the money they loose was not their own.