FANG: Why this bubble is ready to burst

WE ARE deep into the tech bubble now. I remember the feeling from last time. It is like missing a train — a sense that everyone else is going somewhere extremely important and you’re missing out.

You can see this bubble in crypto-currencies and the stock market most clearly. The companies they call FANG — Facebook, Amazon, Netflix and Google — have swollen like rivers in flood.

Google (now officially called Alphabet) is the grandpa of the group. Its stock has gone up from $400 to $1200 in the past five years. A very rapid tripling, but not so impressive compared to the rest.

Amazon has gone from $260 a share to $1600 — a sixfold increase in five years. Facebook has gone from $26 to $181 — a near sevenfold jump.

Netflix though takes the prize for growth, shooting up from $26 to $320 in five years — a more than twelve-fold increase.

As you can see on the charts, Amazon and Netflix shot up especially fast especially recently. What’s interesting is they are not the ones making lots of money. While Google and Facebook made $28.5 billion in profit last year between them, Amazon and Netflix made $3.5 billion.

People are buying these stocks not because of where they’re at, but where they think the companies are going. They expect a future where Netflix and Amazon are dominant.

This is the basis of the bubble. Expectations. It is driven by hope for the future and fear of missing out. Investors are all trying to get in early for companies they think will rule the world in a few years. While that might be possible for a company like Amazon, the bubble is much broader than just it. It includes hundreds of listed companies, cryptocurrencies like Bitcoin, and more besides.

Companies not traded on the public stock market are also valued at crazy levels. Here’s a graphic showing what the tech industry calls “unicorns” — privately held technology companies valued at more than $1 billion. The name was invented back when these were rare, but now they are more like pigeons, flocking all over Silicon Valley.



~ by seeker401 on March 22, 2018.

2 Responses to “FANG: Why this bubble is ready to burst”

  1. And, all it takes is one prick… and, pop it all goes;

  2. Reblogged this on UZA – a people's court of conscience.

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