tech stock bubble

Yahoo Sold To Verizon: Lessons For Investors

Yahoo sold its core business today to Verizon for $4.8Billion. Yahoo was worth $125Billion at the top of the 2000 tech bubble. The company still retains assets worth $40Billion, most of which consist of stock in Alibaba, a Chinese internet company and Softbank in Japan. This implies Yahoo dropped from $125Billion to $40 Billion, a 68% drop. It would be lower if taxes were paid on the appreciation of Alibaba stock. Assuming that Alibaba experiences the fate of many tech companies and drops significantly in price the same degree as Yahoo or AOL did then Yahoo basically is worth about $4.8billion for the core, $4Billion for Alibaba, after tax, and another $5billion for Yahoo’s shares in Softbank, and a Billion

2016-07-25T15:05:24-07:00 July 25th, 2016|mayflowercapital blog|Comments Off on Yahoo Sold To Verizon: Lessons For Investors

Failed Central Bank Policy Will Lead To Bear Market

Keynesian deficit based fiscal stimulus and extreme monetary policy such as Quantitative Easing and ZIRP are based on the assumption that wealthy people mistakenly hoard cash instead of spending and investing and if they can be tricked into spending then the economy will get out of stagnation or depression. The problem is that the object of the manipulation doesn’t want to be manipulated and is searching for evidence that such a policy might make him or her worse off. Thus these policies are less likely to work the more aggressive they become. During a time of runaway inflation accompanied by price controls consumers and merchants know they mast plan ahead for that. Merchants react during inflation by withholding artificially low

2016-05-11T14:31:56-07:00 May 11th, 2016|mayflowercapital blog|Comments Off on Failed Central Bank Policy Will Lead To Bear Market

Stock Crash Intensifies

Today LinkedIn crashed 44%, down 62% from its peak and is now at same level as the pre-bubble era of mid-2012. Many NASDAQ listed companies also went down significantly today. The main thing propping up stocks have been a few glamorous NiftyFifty FANG tech stocks. The slaughter of LNKD shareholders made other tech investors nervous. I feel they will lose faith in momentum investing, which advocates buying simply because others are buying, and this will trigger a massive rout in tech stocks. Then dramatic losses in tech will inspire caution in investors of more traditional stocks, causing them to awaken to the high PE ratios. Thus broad market indexes will decline significantly. The Federal Reserve can’t cut rates any more

2016-02-05T15:17:29-08:00 February 5th, 2016|mayflowercapital blog|Comments Off on Stock Crash Intensifies

Tech Doesn’t Hurt Employment But Tech Stocks Can Be Dangerous

Technology creates new layers of complexity that require more experts, trainers, inspectors, etc. Technology creates totally new types of jobs such as a Search Engine Optimizer, etc. An amazing article in the New York Times about how consumer who use Google’s search system are fooled by dishonest businesses that create phony office locations and how honest businesses are fighting back shows the importance of human work to fight back against marketing fraud. The article mentions someone hired a private detective to research this problem and another hired an attorney to subpoena records. Thus non-tech jobs were created. I’m a tech optimist regarding the idea that tech will create jobs and growth. Tech allows the opportunity for new, more complicated things

2016-02-01T13:57:30-08:00 February 1st, 2016|mayflowercapital blog|Comments Off on Tech Doesn’t Hurt Employment But Tech Stocks Can Be Dangerous

Nikkei Stocks Up A Lot: Should You Buy?

The Nikkei stock exchange in Osaka went up lot tonight and was up a lot in the past three years. Should you buy it? The problem is the PE10 ratio is roughly 22 versus a recent high of 27 in the U.S. before stocks went down in the U.S. A fair PE10 is around 15 and a good buying opportunity is around 10 or even better at 8. Thus Japanese stocks are too high. Additionally they fail to meet the very important Buffett-style standards of quality of earnings, return on equity, return on sales, etc. Many Japanese companies can’t even make 5% return on equity and many U.S. companies get over 10%. I believe the ratio of return on equity

2016-01-21T19:13:18-08:00 January 21st, 2016|mayflowercapital blog|Comments Off on Nikkei Stocks Up A Lot: Should You Buy?

Is Amazon Stock Similar To Japan’s Economy?

During the 1980’s Japan’s companies were rapidly growing and produced globally popular, excellent products. But their economy went into a Soft Depression in 1990 and never really recovered. The problem with investing in Japan both in the 1980’s and now is that their public companies usually have a low return on equity. Instead of focusing on profit margins the goal is to expand market share. A similar situation exists in China, except it is even more extreme, where negative profits may be tolerated in the goal for growth. The situation in Japan reminds me of Amazon which has had minimal profits and instead prefers to focus on spending funds to pursue growth and quality service. Like Japanese companies (or actually,

2017-01-10T23:33:04-08:00 January 11th, 2016|mayflowercapital blog|Comments Off on Is Amazon Stock Similar To Japan’s Economy?

Can FANG Stocks Keep Propping Up The Stock Market?

In the past four months the NiftyNine or FANG stocks have broken away from the SP index and away from the SP equally weighted index. The NiftyNine are nine stocks (Facebook, Netflix, Google, Amazon, Starbucks, Priceline, Microsoft, Ebay, Salesforce) doing much better than the rest of the market. They act like the NiftyFifty stocks of the 1966-1973 market when stocks were going down but the NiftyFifty were going up. The NiftyFifty often had PE ratios of 60, about four times what is reasonable. They plunged deeply in the crash of 1973 and if one calculated the inflation adjusted decline in value then the decline was even worse since inflation was high in the 1970’s.   If the FANG stocks (FB,

2017-01-10T23:33:10-08:00 November 30th, 2015|mayflowercapital blog|Comments Off on Can FANG Stocks Keep Propping Up The Stock Market?