[Note: this post was accused of being a bit non-sequitur. To be clear, the point is this:
The U.S. Subprime mortgage crisis of 2008 was caused by inflation in the prices of CDOs and CLOs (which were backed by mortgages that would never get repaid).
I’m saying: The current tech bubble is being caused by inflation in the prices of secondary market securities (which are backed by VC-backed startups that aren’t monetizing and don’t have solid business models).
Paul Graham says that the current economic state isn’t like the Dot-Com Bubble of the 90s.. but I’m arguing that the current economic state is like the U.S. Housing Bubble a few years back (junk-wise, that is). Point is: there’s a bubble.
And, now, back to your regularly scheduled program.]

Paul G and the Bubble

and I quote sir @paulg defending his assertion that there isn’t a tech bubble via a Hacker News comment on the topic:
“I was here in the Valley for the original Bubble, and the situation now is nothing like that was. Back then people were saying there was a “new economy” driven by the Internet, and that productivity was going to go up like a step function, which justified higher p/e ratios for any company that could claim to be a participant. If you had money to invest you felt like you had to have most of it in the stock market, because money parked in bonds would miss out on all this growth that was coming.”

even though the last tech bubble isn’t like the current bubble, there’s still a bubble… more like the mortgage bubble though. That bubble of the 2000s didn’t have anything to do with increasing productivity in a “new economy” or money being moved from bonds to stocks, and that bad boy busted like an adolescent’s pimple.

He goes on to say: “What’s happening now is a lot more localized. A few professional investors are paying higher valuations for startups than they were a few years ago. But the number of participants and the amounts of money moving around are both very small compared to the 90s. Plus the companies are better. In the 90s, it was the dumb leading the dumb: smooth-talking MBAs were raising money from hapless LPs and investing it in startups run by other smooth-talking MBAs. Now it’s Yuri Milner investing in a company run by Mark Zuckerberg.”

Paul, JP Morgan just closed on a $1.2 billion fund for new tech startups. And many other banks are following suit, because that’s what banks do, just like they wear them. Carlyle and other buyout firms are swallowing up VC firms like a toothless prostitute. So, a little more than a few guys like Yuri Milner and Zuckerberg. Though, you, Paul, stand to gain from all of this, as your incubation/mentorship model has been deemed the golden method to tech investing. You might be a bit bias, huh?

There is a bubble. And it’s getting bigger.

Advertisements