Benner on Tech: Nasdaq Deja Vu
People are Talking About…
The closing price (5,008.10) got some press because, you know, things ended pretty badly the last time the index crossed the 5,000 mark back in March 2000. Tech stocks began a two-year downward spiral that wiped out a lot of wealth for investors and put the venture industry into a deep freeze.
But bad is relative, I guess. When the Nasdaq crossed this level 15 years ago, I suppose the boom could have marched higher for a quarter or two more, only to crash harder later on. The markets could have fallen prey to exogenous shocks like, say, a sea of corporate accounting scandals and a huge terrorist attack on U.S. soil. Or the weight of the industry’s exuberance would have brought it low eventually because the cycle always has to turn.
There’s an argument to be made that it would be better for air to come out of a boom before it morphs into a bubble that becomes a mass frenzy of investing activity that ends in intense pain. But human nature (and, frankly, global low interest-rate policies) means that we usually go for the hard landing.
This time seems no different. Analysts were eager to say that the Nasdaq will charge past 5,000 as we wait for lots of highly-valued private companies such as Uber and Airnbnb to go public. Stocks are booming, in part, because of supply and demand -- a phenomenon that I wrote about last summer. The number of publicly traded stocks in the U.S. had shrunk by 44 percent to 5,008 at the beginning of last year, down from a peak of 8,884 in 1997.
Importantly, the broader market is participating as robustly as the Nasdaq in the rally, thanks to low interest rates around the world. The S&P 500 and the Dow Jones Industrial average both closed at record highs yesterday. Fred Hickey, author of the High-Tech Strategist, recently noted that there hasn’t been a stock market correction in more than three years. Last year the S&P never fell for more than three days in a row, which he notes has never happened before in the 90-year history of the index. The market’s price-to-sales ratio and market cap-to-GDP ratio (which he calls Warren Buffett’s favorite indicator) are at all time highs too. Price-to-earnings ratios haven’t been this high since the market topped out in September 2007.
I mention this all not to say that we’re heading for a tech collapse, but to say that when the market corrects, more than one sector will get hit. This broad-based exuberance is buoyed by market forces that are bigger than a single industry. It just so happens that tech companies are doing truly innovative things, and investors, with few other places to turn for yield, are dumping money on the sector. Public companies like Apple and private ones like Uber have become the faces of the froth, but this isn't just a tech boom.
Ellen Pao v. Kleiner Perkins: Partner emeritus Ray Lane said he was sorry that Nazre wasn't fired sooner after he tried to push into a female colleague's hotel room and threatened her safety while wearing only his bathrobe, Bloomberg reports. The glaring lack of human resources know-how wasn't yesterday's only surprise. Re/code says that when high-profile female partner Mary Meeker joined the firm in 2010, she was excluded from a senior, lucrative role on the fund that she helped to run.
Paydiant, the payments startup that's working on Wal-Mart's mobile wallet app, will be acquired by PayPal for around $280 million, Bloomberg reports.
Tinder will charge users under 30 $9.99 and users 30 and older $19.99 for a Tinder Plus subscription, Bloomberg reports.
Uber launched a quarterly print publication called "Momentum" that it hopes will foster community among its drivers, Business Insider reports.
Veracode, a cybersecurity startup, is preparing to go public in May, Fortune reports.
Xiaomi is introducing a GoPro-like camera for about half the price, TechCrunch reports. GoPro stock fell nearly 5 percent after the news broke.
People and Personnel Moves
Mary Lou Jepsen has joined Oculus Rift, Re/code reports. She was previously an executive at Google X.
** Related: The Kernel says that the sad truth about Oculus is that there's not yet a reason to use it.
Fake orders and sham storefronts have become fixtures in the company's cutthroat online retail empire, the Wall Street Journal reports. Taiwanese officials are upset that the company registered to do business on the island via a Singaporean subsidiary, the Wall Street Journal reports.
Bloomberg View's Justin Fox talks about why Apple can afford to care about our privacy more than other tech companies. 9to5Mac reports that the Apple Watch will hit shelves outside of the U.S. this April, too. And a Morgan Stanley analyst increased her Apple stock price target to $160 and said the company could have a total addressable market of $3.4 trillion by 2020, Business Insider reports.
Mark Zuckerberg told Wired's Jessi Hempel during his Mobile World Congress interview that telecoms have nothing to fear from Internet.org.
The company met with top European telecom companies last year to find ways to work together, the Wall Street Journal reports. Lo and behold, senior vice president Sundar Pichai just confirmed that Google is working with the telcos to offer a wireless service, Bloomberg reports. The company seems to have rolled back a pledge to automatically encrypt Android 5.0 Lollipop, according to Ars Technica. And the company's Street View team is using a zipline to capture images of the Amazon rainforest, VentureBeat reports.
It's official. The company is buying Aruba Networks for $2.7 billion, its biggest deal in years, Bloomberg reports.
Backchannel has a long, laudatory profile of Marissa Mayer's tenure at Yahoo that says she's completed "step one" of the turnaround. The story doesn't say whether that's one out of 10 or 100.
President Barack Obama criticized China for pushing U.S. tech firms to hand over encryption keys and install backdoors that can be used to spy on customers (the sort of access that U.S. intelligence agencies want, too), Reuters reports.
Thanks to strong demand for cybersecurity products, Palo Alto Networks reported better-than-expected earnings, the Wall Street Journal reports.
Now you can buy Claire Underwood's amazing dresses and Cookie Lyon's swank jumpsuits, thanks to LookLive.
News and Notes
Net neutrality's real revolution is regulating mobile Internet access like wired networks, argues the Verge's Nilay Patel. The New York Times reports that FCC chairman Tom Wheeler was pitching his vision of an open Internet to the regulators gathered at the Mobile World Congress.
Goldman Sachs' enterprise social network for Wall Street, Symphony, will roll out in July, the New York Post reports.
Could you run your mobile phone on Wi-Fi alone? The Wall Street Journal's Ryan Knutsen did it for 30 days with few problems. First cable, now cellular.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.