Thursday, December 5, 2013
S&P 500 up 20% in 2014? Re-live the Bubbling 1990s
Is it by coincidence that this past year has been filled with events bearing resemblance to the market in the late 1990s? I personally have battlefield experience in the technology capital market during the late 1990s, and the market trade is too analogous to ignore. Show me social networking companies going public with sky-high valuations like Twitter (TWTR) and LinkedIn (LNKD) or other tech companies with high cash burn rates and uncertain revenue models doubling in price on the first trading day post-IPO, and I say deja vu. Need I point back to the many companies that were taken public, only to fold in the late 90s boom like Sycamore Networks, Pets.com, Webvan.com. The stream of IPOs is a function of the flow of funds in the capital market, triggered to a large degree by Fed policy and U.S. fiscal policy and the resulting interaction between the foreign capital markets and the United States. Not by coincidence, many of the government bureaucrats from the Clinton administration have had a hand in architecting the Obama economic plan. So, you can imagine why we are seeing comparable market results today.