The Five Horsemen FAANG

2017年8月17日

Right now many analysts agree that the market is overvalued, but many believe that just because it is overvalued doesn't mean it needs to be corrected. Many traders now trade with cognitive dissonance because the market is overdue for a correction. Just because there may be a "bubble" that doesn't mean that it will "pop". But I think that due to and overdated correction some markets may take a hit. And especially markets that are in a "bubble" or are built upon synthetic or "abstract revenue". I think that there is a tech bubble right now, and there are clear indicators that the market is built upon what I would call "abstract revenue". "Abstract revenue" is a term that I use to call a firm that is overvalued, and has the plan to go public or grow the company. I think that "abstract revenue" comes from the Silicon Valley Mindest that "not all businesses are created equal" idea. Some of the troubles with tech startups is that the owners and investors try to scale the business as a startup, which usually tends to give companies an overvaluation or too much work for itself. Many young companies have been struggling such as Zenefits, Dropbox, Theranos, Jet.com, Flipboard, Square, Snapchat, Zirtualy, and Homejoy. But even with these murky waters investors still invest in tech, and VC-sponsorships still take firms public. Tech has grown a lot lately and that is a bit worrisome. To begin I will start off with the macroeconomic trends that I see on the public side. I will start with AAPL the biggest tech firm in the world. On the balance sheet, they hold around $246 billion dollars. My first question is "why doesn't apple acquire more companies?" Which is usually responded with its overseas accounts that are better for taxes and investments. Apple doesn't necessarily need to buy companies, but if the market is going up and there is a lot of cash it is unusual on why they aren't acquiring firms right now. I want to look at Apple's latest acquisitions that can be calculated. In 2017 Apple acquired a company, Lattice Data for around 200m. In 2015 it had just raised 20m, and the company only has 20 engineers. This would mean that the company has grown 1000% in 2 years, which is a clear indicator that the company is overvalued. Apple isn't the only company that holds a lot of cash and isn't too interested in acquiring. Facebook has around $3.1 billion in cash and $6.2 in marketable securities. All of these big tech firms are holding cash, while the tech startups have been booming and they are not acquiring. Why would they not acquire? Maybe they see that the market is overvalued. But what difference does it make if the market is overvalued unless it is going to be corrected? Maybe the companies are holding onto cash to cushion themselves, but those are clear indicators among the big tech firms. On the public-side of the market, there has been less IPOs this year and if the market is performing well then why aren't they going public. On the private side, I think that many companies are overvalued, the only way to know is to look at acquisitions, young IPOs, and VC-sponsorship. Many of them are made up of small companies that I think are overvalued. In the end I believe that the tech market, the venture capitalism market, and the private tech startup market is built upon "abstract revenue" and is in a bubble. And although the bubble is not planned to pop, the market is overdue for a correction, therefore, I believe that the tech is in a bubble like situation.