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from the double-double-toil-and-trouble-fire-burn-and-market-bubble dept.
Conor Dougherty writes in the NYT that the tech industry’s venture capitalists — the financiers who bet on companies when they are little more than an idea — are going out of their way to avoid the one word that could describe what is happening around them: Bubble “I guess it is a scary word because in some sense no one wants it to stop,” says Tomasz Tunguz. “And so if you utter it, do you pop it?”
In 2000, tech stocks crashed, venture capital dried up and many young companies were vaporized. Today, people see shades of 2000 in the enormous valuations assigned to private companies like Uber, with a valuation of $41 billion, and Slack, the corporate messaging service that is about a year old and valued at $2.8 billion in its latest funding round.
A few years ago private companies worth more than $1 billion were rare enough that venture capitalists called them “unicorns.” Today, there are 107 unicorns and while nobody doubts that many of tech’s unicorns are indeed real businesses, valuations are inflating, leading some people to worry that investment decisions are being guided by something venture capitalists call FOMO — the fear of missing out.
With interest rates at historic lows, excess capital causes investment bubbles. The result is too much money chasing too few great deals. Unfortunately, overcapitalizing startups with easy money results in superfluous spending and dangerously high burn rates and investors are happy to admit that this torrid pace of investment has started to worry them. “Do I think companies are overvalued as a whole? No,” says Sam Altman, president of Y Combinator. “Do I think too much money can kill good companies? Yes. And that is an important difference.”
(Score: 0) by Anonymous Coward on Monday May 25 2015, @02:23PM
I'm getting close to retirement age (USA). An IRA I started long ago is in a Fortune 500 index fund, which has been doing really well lately. Is it time to switch over to something more conservative (ie, money market funds)? Or will the current tech bubble pop on it's own with minimal damage to the larger stock market?
(Score: 2) by rts008 on Monday May 25 2015, @03:25PM
I don't feel knowledgeable enough to answer your question, but I do feel comfortable enough to say that I doubt the tech bubble can pop without significantly harming other 'areas'. The reason I say that is that tech is so widespread and entrenched in almost everything nowadays, it has a huge impact on almost everything.
One example: 'High-speed trading', where a software or hardware glitch can have profound impact on the stock market, not even considering the mention of deliberate manipulation.
I switched mine to more 'traditionally/historic' stable investments a few years ago, and haven't felt foolish for it. I'm not much of a gambler with my limited resources. :-)
(Score: 2) by bzipitidoo on Monday May 25 2015, @04:56PM
We're still in a depressed environment. There are still no real good places to park money. While interest rates stay near 0%, savings accounts and money markets won't pay well. So what do people do, when interest is so low? Bonds are horrible. The moment interest goes up, bonds tank, as everyone will want to trade up, dump those stinkers with super low interest rates in favor of new issues of bonds that pay more. Still, people put some money there. It's only when interest rates are high and likely to head down that bonds are good-- if, that is, the bond issuers can weather the downturn and not go bankrupt, leaving their bonds worthless. Stocks are about it, and because they're about the only place to go, they're overvalued right now.
Gold has seldom been a good investment. Beware of "gold bugs", who say that the stock market will lose 90% of its value. If that happened, gold would be a good investment, but the market is almost certainly not ever going to dive that far. 30%, yes, 50% yes, but not 90%. The last 50% dive, in 2008, was accompanied by much angst and government action to bail investors out. Imagine what the government would do if the market actually flirted with a 90% drop.
We're still perilously close to deflation. In that environment, the best place for an individual to put money is literally under the mattress. Collectively, we should invest more. However, we shouldn't invest in just anything. We need to think beyond money. So much of finance is about exploitation and greed. It won't do us any good to invest more if we invest in reckless, extractive industry and wreck the environment in the process.
(Score: 0) by Anonymous Coward on Monday May 25 2015, @06:06PM
Another option is to assume you won't need the money in the next ~5-10 years--keep working if it's still fun. This seems to be about (very roughly) the stock market cycle time, in recent history. Grit your teeth, accept that market timing doesn't work, and stay in S&P 500, knowing that it might fall 50% again (like 2001 and 2008), but will charge back up before you have to start taking the minimum required payout at age 71(?).
(Score: 0) by Anonymous Coward on Monday May 25 2015, @06:22PM
You are close to retirement! Good god man of course it is time to move to conservative ventures! Don't risk what you can't lose!
(Score: 2) by Non Sequor on Tuesday May 26 2015, @01:03AM
You've cut a good chunk of your investment risk by diversifying your investments. Moving into something else needs to be based on analysis of risks and benefits.
Dropping down to a money market may be throwing out the baby with the bathwater. A money market fund is expected to only offer a small return over inflation, if any. That won't work unless you can make the money on hand last the rest of your life after accounting for social security.
Most retirement portfolio recommendations are more bonds than stocks, but still some stocks. You can manage some of your investment risk by setting a budget that leaves some padding for adverse circumstances. If there's a stock or bond market crash, a combination of tightening spending and not doing anything rash with your investments can manage some of that risk.
The headline life expectancy numbers are based on period rates. That means that if you take the rates of death by age observed in, say, 2014 and pretended they applied to your entire life, that would be the life expectancy. You should expect to live a few years longer than the "current" life expectancy plus a bit more than that for the sake of planning. If you die younger, you may very well leave higher medical bills in your wake anyway.
Plan a budget so that even if you live longer than expected, you still have some money left, giving you some means of adjusting your spending over time.
Write your congressman. Tell him he sucks.