Google has crossed the $1000 mark; Apple is beginning to recover; Facebook came back from the dead and it’s now doing much better than ever since it went IPO. What’s going on here? It seems like the only tech stocks that are down in the dumps are perennial dogs like Zynga and Groupon. What’s going on? It may be a Wall Street Affirmation of the excitement and growth potential of the tech space, after all, there is a heavy ferment in technology. You only need to look at wearable wireless to see how exciting the promise of augmented reality, cloud computing and mobile data collection could be.
On the business front, big data is making all sorts of waves in the hardware space. There is just a huge diversity and a growing demand for tablets and other mobile devices. There’s a lot to be excited and optimistic about. That is exactly what scares a lot of the critics of the recent run-up in tech stocks. The reality is that traditional American industries are not doing that hot. The job market still remains soft and the global economy lead by the United States is really running on life support due to quantitative easing and other fiscal interventions by the US Federal Reserve. All that money going to emerging countries’ stock markets like India and the Philippines are partly due to the fact that money is so cheap in the United States.
The question whenever you have such a huge run-up and a hot global market is “When will the party end?” Well, the numbers do look suspicious. Suspicious enough to warrant comparison to 1999 to 2001. You remember what happened then, right? Back then, we had a lot of irrational exuberance regarding tech stocks. Technology companies that weren’t making money were worth $200 to $300 a pop and the real economy wasn’t growing as fast as it could be. It eventually all unraveled once people started to realize that these tech stocks were overvalued. A lot of financial analysts say that the market would have tanked anyway regardless of whether September 11 happened or not.
Are we headed towards that crash? It looks like it because there’s a lot of speculation. Also, the rise in values seems to be so fast in such a short period of time. It looks very unstable and unsustainable. If you are in the market right now, it’s probably a good idea to invest in a mutual fund that does a lot of shorting. Short funds make money when the market crashes. There’s a good chance that the market is in for correction and considering how all stock markets are interlinked and depending how the fiscal authorities deal with the pending crash, we may be in for a long hard drive. Remember, after the crash of 2008, the great recession, a lot of the old failsafe mechanisms are no longer in face. In other words, the global economic system is just running on America’s good word. If something drastically happens to erode trust in the American greenback, all bets are off as to how deep and how long the next recession or depression would be, so get ready.