Is There a Tech Bubble?

Silicon valley was not hit as hard during the financial crisis and the tech stocks have done well since. Nasdaq has reached all time high exceeding 2000 bubble levels, retreated a bit. Could we argue we are not at bubble levels yet? Was it business as usual for Facebook to pay 19 billion dollars for a chat app? Has Apply stock already topped? Are we close to a market correction? Or is it going to be another blood bath, another market crash that rivals the previous two crashes this century?

What You Can Gain From One Tech CEO’s $355 Million Dollar Loss

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“How to lose $355 million in two weeks” — it’s a lesson tech CEO Jack Dorsey just learned the hard way. This from a recent MarketWatch article:

Shares of the two companies that Dorsey founded and now runs — Twitter Inc. and Square Inc. — have plunged since their quarterly reports, wiping away a combined $3.7 billion in market value. If it’s any consolation to investors, Dorsey is feeling their pain, as he personally has lost a combined $355 million on his stakes in the companies.

The article went on to blame the companies’ lackluster quarterly statements for the declines.

As a result, on May 9, mainstream analysts dropped their ratings from Hold to Sell … just as Twitter hit new all-time lows.

Their position is a stark contrast from fewer than six months ago, when analysts pointed to the IPO market as “proof” that there is no tech bubble. This from a Nov. 10, 2015, Fortune article:

Square IPO Price Proves There Is No Tech Bubble

A real tech bubble, many say, can exist only if irrational exuberance has extended to the public equity market–where most tech company value lies–and that Square’s relatively modest pricing expectations are evidence that it has not.

Our analysts disagreed. This from EWI’s Financial Forecast Service on Dec. 4, 2015:

… the dissipating interest in IPOs actually fits perfectly with the early stages of a bear market. We know because we listed “a record rate” of IPO cancellations under “More Signs of a Burst Bubble” in [The Elliott Wave Financial Forecast’s] May 2008 issue, shortly before the bottom fell out of stock prices.

So not only were the experts saying just the wrong thing at just the wrong time, our analysts here at EWI were preparing subscribers for what virtually no one else saw coming: declining tech stocks.

And in this month’s issue of The Elliott Wave Financial Forecast, part of EWI’s flagship Financial Forecast Service, they’re doing it again. This from our latest analysis:

A year ago, as the NASDAQ Composite finally managed to rally to a new all-time high for the first time since 2000, many technology enthusiasts insisted that this time the rally was on “more solid ground than its counterpart in 2000.” EWFF countered that bullish imaginations were inflamed nearly as much as they were then and stated that the “technology euphoria [of 2015] was powerful enough to fuel another outsized retrenchment by the NASDAQ.” As the index topped in July, EWFF noted the dominance of a few tech heavyweights and stated that the sector was “falling in line with the nascent bear market.” At the end of the year, the champagne corks were still popping and EWFF quoted widespread expressions of a “limitless belief in technology.” While sentiment toward technology “remained effervescent,” the January EWFF observed the narrowing participation of tech stocks and stated that it was a sure sign that the technology sector was ready for its next sobering.

Since then, many of the core myths that underpinned various high tech “story” stocks have been revealed as dubious propositions.

Now, if you were a Financial Forecast Service subscriber, you could continue reading right now the special section our editors’ titled, “Technology Wakes Up to a Cold New World.”

But since you are not yet a subscriber, here’s the next best thing: Read the entire special section inside our new free report for Club EWI members, The Coming Cold Reality for Tech Stocks.

The Coming Cold Reality for Tech Stocks — a quick 5-minute read — includes our latest research, logic and perspective on the tech industry and the U.S. stock market (the stuff our subscribers pay for exclusive access to every month).

If you have a financial interest in tech stocks, you don’t want to miss this free report. Follow the link below to have the report sent directly to your inbox, 100% on the house.

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