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CommentThursday, October 4, 2007

Values And Egos Inflate: The Bubble Returns

11 Comments

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the cost of running Web 1.0

the cost of running Web 1.0 companies was virtually nil, too. I see this as a reason for lower valuations, not higher. It doesn't take as much work for newcomers to grab the market. It's an industry of fads and investment should be for the short term only.

The Bubble Returns

Someone equates the internet to Exxon. I'm sure after all these years Exxon has reached its gross world sales. As he quotes "Exxon earns about $.10 off of each dollar", - the internet is an exact reversal with about 10% cost of sales.
The internet has just an 18% penetration into potential world usage.
There is only one way the internet can go and that is UP.
In world terms, these predictions are conservative.

Smart Biz Copywriting

A very interesting article. I wonder though how many people have read "The Next Great Bubble Boom" by Harry S. Dent, Jr.

Smart Biz Copywriting

Valuations

The valuations for these companies is correct. Sure, some will be inflated, but the bottom line, the sites that have natural, ongoing sustainable growth through communities are valuable. As media shifts more an more away from traditional advertising and more into community driven marketing (ie: social media), the sites with the communities grow and grow in value.

the bubble

Ok, so the first guy that walks in with 100 million dollars can buy me out then.
www.corrosionvci.com/corrosion

This Bubble will Expode

Here’s a list of fundamentals that should have had a negative effect on the stock market:

Plunging prices of homes
Plunging sales of homes
The new, much stricter lending guidelines
The increasing number of sub-prime ARM’s approaching reset dates
The increasing number of mortgage defaults
The increasing number of foreclosures
The burgeoning amount of credit card debt
The national debt at 9 trillion dollars
The value of the U.S. Dollar plunging to all-time lows
Skyrocketing commodity prices unseen since the 1970’s
Oil at record prices
The increasing threat of stagflation if the Fed lowers rates again
The increasing threat of recession
Recent runs on banks and lender closures

Yet, the markets haven’t blinked an eye. The Fed DID in fact create a monster, otherwise known on Wall Street, as a Bull Market.

Is 100 times earnings too much?

I believe a company is worth 10 times its annual earnings. This applies for online companies as well. I don't really believe in the "powerful future" of online advertising and e-comers. Selling something online takes so much more efforts, so as to wipe all of the advantages compared to brick and mortar shop.

Wake up People! Overpriced

Wake up People! Overpriced housing, a credit based consumer economy, when will it all end?

Google is trading with a PE of 50!

Unless they plan on turning wine into water, curing world hunger, and performing miracles across the world, I wouldn't put all of my eggs into their basket!

Remember - what goes up - Will come down...Do we not all remember the meltdown in 2000? AOL was going to rule the world, Yahoo was pushing 500 a share...

Bubble or Real Value

Ultimately the problem with valuations is that it must naturally factor in FUTURE expectations of cash flows. If Google is worth $750 billion dollars, that means somebody thinks it can earn $50-$100 billion per year in profit.

ExxonMobil, currently the leading corporation in terms of gross sales, earns about $.10 off of each dollar that it sells and earns between $30-$40 billion.

If Google is currently valued at $750 billion, my opinion is that is a 'bubble' valuation.

Ego Bubble

It will both expand and pop. The pop won't kill off everyone though. Those who are riding the bubble with the benefit of past experience and/or big dollar support are, or at least should be, playing it close to the vest. Just like when kids soap bubbles pop, the result is often lots of smaller bubbles. Some pick up on the winds of change and soar while others come crashing to the ground. It's nothing more than the free-market principal in action in a highly visible way. Just like the kids bubbles, it's entertaining to watch so long as there's enough soap to keep the game going. Fortunately, I'm not heavily invested in bubbles so the consequences for me, pop or expand or both, are minimal. The nice thing about working in advertising and graphics is that people need our services under either circumstance.

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