Tag Archives: social media

silicon valley’s bubble is bursting

You’ve probably heard by now that last week was the worst opening week in stock market history. But even that horrid headline doesn’t quite capture the sheer scale of the carnage. In five days, the S&P 500 fell six percent, the Dow fell 6.2%, and the NASDAQ fell 7.3%. Small caps fared even worse than the major indexes, with the Russell 2000 shedding 7.9%.

And yet, as ugly as 2016 has been so far, I still see overvalued stocks everywhere I look, especially here in the Bay Area.

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social media stocks: #morepaincoming

Like many, I am surprised (and somewhat dismayed) by the popularity of social media. Personally, I have made some valuable connections on Twitter. But for the majority of people who habitually log in to social media platforms, I fear time spent on the sites is time wasted. And while all social media companies tout glowing statistics about the rapid growth of their user bases, I remain skeptical about the real social value—and commercial viability—of their products.

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could this be the beginning of the end of the social media mania?

I’m kicking myself for not following my instincts and shorting Yelp (YELP) before it announced utterly rancid earnings last Thursday. For years, the only thing that has mystified me more than Yelp’s business model has been its enduring popularity with Wall Street. As I type, I’m looking at a pile of recent analyst reports with absurd price targets for the company. I like to save these kinds of laughably optimistic reports. It’s a hobby of mine. I’ve still got a glowing buy recommendation for Enron dated only days before the energy behemoth imploded.

For all my doubts about Yelp and other social media stocks, there’s a good reason I have not shorted any of them up to now. It’s just too risky to bet against companies in the midst of a secular mania–and make no mistake, that is exactly what has lifted Yelp, Twitter, LinkedIn and their ilk to stupidly large valuations that they will almost certainly never live up to.

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apple and the depressing new dotcom mania: cynicism

I’ve been visiting companies in Silicon Valley for more than a quarter century. In that time, I’ve met with hundreds of entrepreneurs, executives and management teams there. To a person, they’ve all been bright and ambitious. The Valley has earned its reputation as a hotbed of creativity, innovation, and economic vitality. But let’s be frank, it’s also earned its reputation for building just as many manias and pipe dreams as viable products and services–and I think the time has come to rain on the region’s latest parade of groupthink, self-congratulation and irrational exuberance.

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1999 redux?

As I write about in the book I’m finishing up (it’s due out late this year or early next year–stay tuned for more details!), I’ve lived through a number of asset bubbles, or manias, in my career. By far, the most maniacal of these manias–and the biggest one in the history of capitalism–was the dotcom craziness of the late-1990s. It was absolute bedlam, and its epicenter was down the road from me in Silicon Valley, so I had a front row seat.

The normal metrics for valuing companies went haywire during those days. Revenues didn’t matter. Earnings mattered even less (because they were usually nonexistent). When it came to pricing a dotcom stock, it was all about “eyeballs”–the number of people visiting a given website.

If that sounds familiar, it should. It’s the exact same way people are valuing the darlings of the latest online mania–social media.

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