This isn't your parent's tech bubble

5:00 PM bubble, parents No Comments

| By Rolfe Winkler and Matt Jarzemsky, The Wall Street Journal

Sky-high valuations for unprofitable tech startups stir memories of 1999, but there are some differences.

Twitter plans to go public at a value of $11 billion, without turning a profit. Venture capitalists just valued Pinterest, which generates no revenue, at nearly $4 billion, and an even younger, revenue-deprived company, Snapchat, is angling for a similar price tag.

It isn't quite 1999, when dot-com companies with scant revenue made initial public offerings and tripled in price on their first days of trading. When that bubble popped in 2000, scores of companies went bust, and millions of small investors suffered losses.

Now, shares of Internet companies are soaring again, and signs of pre-2000 exuberance can be seen in Silicon Valley and the nearby area. Home prices in San Francisco and surrounding counties rose more than 15 percent in the past year. Office rents in San Francisco are 23 percent above their 2008 peak.

"It's gotten pretty frothy," says Daniel Cole, a senior portfolio manager at Manulife Asset Management who has invested in highflying IPOs, including for Rocket Fuel (FUEL). The Redwood City, Calif., online-advertising company sold shares to the public last month at $29 each. They traded at $61.72 a share Friday, giving Rocket Fuel a market valuation of $2 billion, without having recorded a profit.

Technology and finance veterans say this time is different -- and it is. Companies going public are more mature, the leadership teams more seasoned, the business models more proven. Social networks such as Twitter and Pinterest are drafting off the success of Facebook (FB), which sports a market value of $126.5 billion, or about 70 times next year's expected earnings.

But the current surge is accelerating, aided by some little-appreciated factors. Big companies are scarcely growing, and interest rates remain near zero, boosting zeal for investment opportunities in companies with high-growth potential. Moreover, a federal law enacted last year will allow startups to raise money from smaller investors, opening a vast new pool of potential funding.

"People are reaching for growth," says Kenneth Turek, who manages the $850 million Neuberger Berman Mid-Cap Growth Fund, and has passed on this year's tech IPOs.

Even some executives benefiting from the rally question its underpinnings. Tesla Motors (TSLA) Chief Executive Elon Musk on Thursday said the electric-car maker's stock price, which has quintupled this year, "is more than we have any right to deserve." Tesla, which has reported one profitable quarter since going public in 2010, is valued at $20.6 billion, seven times its expected 2014 sales, according to S&P Capital IQ.

Netflix (NFLX) Chief Executive Reed Hastings this month told investors in a letter that the video service's stock was benefiting from "euphoria" driven by "momentum" investors. Netflix shares have tripled this year.

By most measures, today's tech-stock mania falls well short of the dot-com era. Many of the companies going public have substantial revenue. When Pets.com completed an IPO in early 2000, it had recorded lifetime sales of about $6 million. Less than 11 months later, the company had dissolved.

This year, shares of newly public technology companies are being valued at 5.6 times sales, estimates University of Florida professor Jay Ritter, who tracks IPOs. That is well short of the median of 26.5 times sales in 1999. Shares of this year's tech IPOs have risen an average of 26 percent on their first day of trading. In 1999 the average was 87 percent.

The average tech company to go public this year is 13 years old, compared with four years old for the IPO class in 1999. Tech's presence in the IPO universe has receded, too. One-fourth of this year's IPOs have been for tech firms, Ritter's data show. In 1999, more than three-fourths were in the tech sector.

"The big difference now is companies like LinkedIn (LNKD), Twitter, Facebook have demonstrated an ability to generate sales, and with the exception of Twitter, profits," Ritter says. In the dot-com days, "there were all sorts of companies going public that were essentially startups."

But investor enthusiasm is filtering down to younger, less-proven companies today, too. Pinterest, an electronic-scrapbook service that began testing ads this month, said Wednesday that it had raised $225 million from venture-capital firms. Pinterest didn't need the money; the company said it hadn't spent any of the $200 million it raised in February when it was valued at $2.5 billion.

The new investment values the three-year-old company at $3.8 billion, a 52 percent jump in eight months.

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5 Bubble that could pop soon

3:11 AM bubble, could No Comments

| By Jeff Reeves, MarketWatch

Emerging markets are just a few of the investment areas that look excessive now Bitcoins and junk bonds. You can not explode, but investors should be cautious.

We are as the Federal Reserve tightened cools politics and emerging markets demand, many unsustainable growth models look not up to expectations from Wall Street and at the seams slowly apart.

Or do you prefer more panic parlance of the blogosphere... some bubbles are getting too crazy.

Not all of these bubbles bursts of course quick or dramatic manner. Sometimes bubbles just vent, steady or slowly, until the air in the inner path, and only the remains of food.

But regardless of the pace is the threat posed by these five bubbles quite clear - and investors should prepare accordingly.

1 Emerging markets

Thailand, Indonesia and the Philippines saw large contractions in their stock markets in June. Was the story that investors were withdrawing money back in the United States to deploy, but now has turned the story into a history of China's slow-down. As evidenced by recent weak manufacturing data, China is growth potential to see serious challenges, and hurt in these markets by proxy.

In other areas you have once elastic regions such as Brazil and Turkey identity crisis with political unrest, rattles stocks in these areas also.

The results have been really ugly. Consider the iShares MSCI Brazil Index ETF (EWZ)-a massive fund with $5.6 billion of assets and the top operated, the mega Caps Petrobras (PBR) and Vale (VALE) included. This ETF Brazil has lost about 25% in just two months.

It's tempting to excuses to make short-term political movements or the long-term potential of the emerging middle class in these markets. But messed up shows that emerging economies in all corners of the world are facing serious challenges.

(2) Junk bonds

Junk bonds had added paired a phenomenal run in recent years as low-interest rate environment, with a hunger for yield among investors, insatiable demand.

But now the winds change. Junk-bond yields a low hit by less than 5% in may, there was just nowhere to go but up, thanks mainly to talk about tighter regulation at the Federal Reserve left. Junk-e-bond yields have already a 2013 high over 6.3% short high-yield bond investment as the collected order with related SPDR Barclays Capital high yield Bond ETF (JNK) waiver to over 5%... even if the market has gathered since mid-May. Subsequent increases in the income move prices further down.

And large Nations and companies dependent on the emerging markets and the afore-mentioned under anderem-- easy money have to find out, a way to the borrow with much higher rates and interest payments. That could mess with the markets in many places across the Board.

Last but not least, if investors simply are looking for a modest return of 5% but starting, instruments such as investment-grade corporate bonds in an environment with higher interest rates there well much safer, big sucking sound are all the air move deflating from the junk bond bubble like people their money for other investments, to deliver the yield with minimal risk.

3Rd flip House

I am still convinced, roughly speaking, housing is in a sustainable recovery. But I can't help but observe the return of the House reflect seminars, commandments, wars, and the idea that a home is an investment that can make a quick profit with minimal risk.

Keep the House Journal reflect in California on a level by 2005, according to a recent report in the Wall Street. Not good.

Thanks to the very tight supply and seller have the momentum weak demand-for the time being heavily favored. This has allowed speculators to infiltrate and start treating real estate as a short-term investment again.

Real estate in the United States are very different, and each area has its own challenges and opportunities. But it is increasingly clear that from the housing downturn in the most affected areas could be ground zero for an other bubble throwing clubs should the towel. View that more than 50% of the real estate transactions in Las Vegas, including the all bar purchases, and an amazing 1 in 10 sales to foreign investors.

Regions, which have stabilized organic demand and economy thanks to a slow improvement is one thing. But House Club in speculative markets better watch out.

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12 Reasons not to fear, market bubble

12:30 PM bubble, market, Reasons No Comments

| By Richard Satran, US News & world report

Investing is never without risk, of course, but memories of the last crash cause investors to miss, the biggest gains in years.

The idea of the financial markets in a another free fall as it will go, which has taken in 2008 never fully by many investors left behind have been. It is one of the reasons, the current has missed rally many of them and stuck with bonds.

Now loans are interest rates, even as risky to spoken bubble, pop is, as soon as the Federal Reserve hikes. Meanwhile, stocks see in 2013, the biggest gains in years.

What is an investor to do? It's not exactly "don't worry, be happy" time. But too much anxiety can be counterproductive.

Investors should start by checking all these dire warnings. You may not all apply. It's never stupid to keep a dose of healthy skepticism. But it's the perception that financial assets completely crazy from the 'Real economy' are hard to.

Here are a dozen reasons why stocks and bonds are not bubbles, bursting wait (along with some reasons why analysts and fund managers say it could still Trouble, even if it not bubble).

Already in August 2008 not much there talk of stocks at risk. Google trends shows that the search terms "bubble has" and "stock crash" fell to the lowest level in nearly five years in the month before the crash. You have increased steadily this year.

But one thing is search queries. Reviews are another. And that could be high. The yields on bonds are close to all-time lows, not even for the costs of inflation. Based on underlying earnings, stocks are close to their average. "The case for a bubble in the bond market is strong. The case for a bubble in the stock market is not a strong", says Hugh Johnson of Hugh Johnson advisors. "The real question: can the Fed let the air out of the bond market in a way that bond market remains orderly trading?"

From the crash of 2008 Rose bonds prices, markets stabilize help. The chance of a "double bubble" is highly unlikely. Unless, of course, this time is different. The threat is that the stocks just get the investor attention because there are no other good option.

"Bullish on, people have shares compared with Treasury bonds with their low historical views. If the upwards, that the story falls apart..., "says James C. Roumell, President and portfolio manager at Roumell asset management.

The most important 10-year Treasury Note fell 25% in price last month its yield jumped 50 basis points (half a percentage point). Prices move to do inverse. But bond investors, nimble bunch, can not simply out of necessity or hold out of habit. "Many people still have their own bonds, because they still think that they are safe.

Sometimes due to investment policy for a fund or an institution, not get,"says Mark Germain, Chief Executive Officer of beacon wealth management.

Shares not steadily, but won in jumps. The first day of trading this year saw a 300-point Dow rally of 2.3%-top winning year, but nowhere in the top 50-day share gains. But just because it is not happening does not mean that investors become more rational.

"If the people on the sidelines suddenly jumped into the market, it could be much damage. Panic buying would, that a bad thing with a market around 10% overvalued", says David Edwards, President of the Heron financial group.

(5) The fear of a "bubble" is partly based on a misconception that people hold huge amounts of interest rate sensitive long bonds

But Treasury data show that the average debt maturity is less than five years. In the last few years the Fed has been to clean up long bonds, and only a few were issued.

This is not to say that higher prices is not that hard to navigate. Price rises would hit major sectors of the economy, including mortgages. "Fixed-rate bonds, the returns have been low for so long... the mentality is still in, will be burned", Brian Levitt, Chief Economist says the Oppenheimer funds. If the Fed raises after all short-term interest rates, it will affect a wide range of borrowing costs.

Housing is a key to stability, since it was the cause of the latest crash and his jump created a perfect storm, froze credit markets and consumer confidence hammered. The bad news is that vulnerabilities in real estate remain. "The recovery of the real estate market is not closed," said David Blitzer, Chairman of S & P index Dow Jones indices as the latest home data was announced. Foreclosures remain high, and rising mortgage interest rates.

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Investors wondering whether another camp tech bubble bursts

1:00 PM another, bubble, bursts, investors, whether, wondering No Comments

Is Facebook still fall? Weigh Pacific Crest securities analyst Evan Wilson and Michael Pachter, Wedbush securities analyst, with trade across the social network company.

The share price value of some of the most well known social media stocks in the doldrums, investors in these companies have itself a question recently: we have again fool get?

During the so-called Internet bubble plowed before a decade investors like money in scores of new Internet companies, which had virtually no sales growth, bets, that technology would change the world and the new dot-coms eventually would turn a profit.

After the collapse of some dotcom names such as Amazon.com, but eventually again and move higher, but in many cases, investors have been proved wrong and the companies, which in investing, had collapsed.

Some are now proposes an another dotcom bubble in the social media space is brewing. The best known example, the, is to show the, Facebook. After years of speculation, that the social media giant public would go did fallen 53 percent in May and since then the stock price and count, flush away from more than 50 billion $ market value.

Facebook's share price hit a new all-time low Tuesday, fall under $18 for the first time, even though it is up here in after-hours trading on news of the company had started, investors and its own employees as its stock price spirals after to calm down.

In a regulatory filing that said social network its CEO Mark Zuckerberg sell not shares of the company for a year, and promised not to sell, one almost to cover tax liability is $2 billion. Social networking moves back effectively buy million shares which will probably bolster its schwachelnde share price this fall and allow the employees in their camp weeks earlier than planned to cash.

Facebook's losses since the initial public offering are not quite as dramatic as that of the other social-media company, which went public last year, including online-gaming site Zynga, the stock price has last 71 percent since the IPO in December year decline, and GroupOn, which has seen the value of the shares diving 84 percent since the IPO in November last year.

The sharp decreases have less with shaky business models and more to do with sky-high expectations for the companies in the emerging social media space, to do, said Jay Ritter, Professor of finance at the University of Florida and expert on initial public offerings.

"Facebook is money making;" It has a successful business model. "As a company, it has continued to perform, although (the Manager) difficulty, money earn with mobile users have had", Ritter said. "The problem has been for investors at a price purchased, divided into very optimistic expectations (for the company)."

S & P Capital IQ equity analyst Scott Kessler is also optimistic. Recently updated he his views on Facebook a "buy," saying that he thinks that much about the potential threat of Facebook's share price as a result of time "depends on a so-called" for the most important investors in the company, is made. The period prevented some early investors-usually venture capital investors and insiders from the sale of million shares that they own in Facebook.

The company focuses more on the monetization of their mobile users now, and in this context, it "better than expected" running, he told CNBC Tuesday, adding that the share price to a level has declined, which makes it even more attractive.

"We see a pretty attractive rate now," he said.

A more moderate view of Internet companies a good sign for the industry is, analysts say. It suggests that technology has evolved since the speculative days of the dotcom boom.

A bright spot in the social media space is LinkedIn, a social network to manage your professional identity and looking for a job. The stock is currently more than 14 percent from the IPO successfully took advantage of a niche in the social media in May of 2011. LinkedIn, Ritter said.

In contrast to this fighting online game site Zynga, to convince investors that it can sustain growth, he added. And perhaps the biggest victim of overly high expectations website is daily deals GroupOn, which went public in November 2011 to great fanfare and with a value of $13 billion. It has since about three quarters every day much shed its market value on concerns about the growth of the business of.

"Groupon high cost, and this is one of the issues which continue as well can be their business model a question mark over," Knight said.

Picking winning stocks is a difficult task, even for professionals, of course.

Knight notes that their share prices by at least 50 percent of their asking prices on their sixth month birthday saw fall 49 companies that moved exchange between 2001 and 2010.

They lost 49 companies 63.1 percent on average in the first six months of public companies, but in the next 18 months on average had a rest, positive with an average return of 22.5 percent during these 18 months.

Knight adds that, if an investor bought shares of technology heavyweights like Microsoft and had held the returns of stock Oracle if it was the 1980s, and "on the ride" losses would have compensated.

Venture capitalists expect that most businesses to lose money that they invest, but they they "10 baggers"-companies such as Google, who call their initial investment as much as 10 times, Ritter said back account.

"If there were a simple rule for fund managers, consistently beat the market it would be easy" he said. "And the proof is that it it just don't."

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