At this point the markets are just comical. All the experts are suggesting that tech is not a bubble, that this time things are different. I hate to point out that the only difference is the names that are leading the bubble. As of this morning Yelp IPOed at $15 and does not make any money. Let me repeat, this company makes $0. That didn’t stop investors, they bought it right up.
When tech comes up Apple has to be at the forefront. We all know Apple is one hell of a company and may be undervalued. Apple actually makes something and turns a profit, this does not pertain to them. But don’t think that if technology falls it won’t take Apple with it.
What should have investors concerned is the P/E rations of these companies. They are growth companies, I will not doubt that argument. Does that mean Linkedin deserves a P/E over 700, Fusion almost 200, Nuance almost 200, and Amazon almost 130? These are P/E ratios that are similar to that of the tech bubble of yesteryear. Many of these companies make minimal to no profits. That my friend is a bubble.
All of technology may not be wrapped up in the mess of overvaluation. That would be nice if the markets did not trade emotionally. As we learned last year the markets can be very emotional and can trade down as hard and as fast as they traded up. With all those technology buffs telling you that the technology bubble is not here, they just want you to keep pumping up their stocks. Watch your money, because those talking heads sure aren’t.