"Tech. See below Aviate Secs re Facebook. 10x PER....no bubble here if true. There was no e-retailing model in 1999. Now there is, so (without irony) "it is different this time".

"We can sneer at 500x PER (and I simply don't like tech to invest in as barriers to entry so low and product cycles so fast), but there are in fact good and bad bubbles.

"Good bubbles make things change or somehow different in our lives, usually for the better. Good bubbles create new techs (railways in 19th C, healthcare in 20th C, internet in 21st C etc etc) by financing them. Bad bubbles only serve to pump up useless uneconomic asset prices (Toyko RE 1980s, tulips, Gold....yes, I really wrote that.....I can not think of one single generalized "use" for gold). Bad bubbles leave our lives basically unchanged. Bad bubbles can however change us psychologically, I would argue for about one generation, as investors "learn" that gold is a bad -or good- investment.

"1999+ tech bubble was a good bubble as it changed the way we live our lives. The e-retailing model is now proven (not so in 1999).

"I think we should use the word BUBBLE more discriminately in future, even though the investment result may be similar in both cases (nemesis / unsustainable crazy prices, catharsis /collapse etc)."

Eoin Treacy's view Thank you for this informative email. From a social perspective, yes there are many positive aspects to investment manias. Rail roads got built to open up the West, the TMT revolution introduced efficiencies which continue to change how we live and do business. However from an investment perspective, market manias are all the same. They all represent a time when expectations becomes divorced from reality.

A market experiencing bullish mania will appear to be the strongest in the world until the contraction inherent to all such moves eventually tears it down. The challenge for Investors is to retain the analytical objectivity of the naturalist rather than allow personal responsibility dissolve among the herd.

Every major bull market has winners and losers. It is often difficult to pick which one is which on the way up, but in the aftermath of a steep decline, those which bottom early and subsequently exhibit relative strength often do so for a reason.

Here is the section from Aviate's letter referred to in the above email:

Facebook is the network - providing faster communication, distribution, and relevance than any previous medium, for a fraction of the cost. Even Farmers who market their products directly to the public are using the Internet and social media sites like Facebook to promote their operations. We think Facebook trades 10x yr 2.


Social media is revolutionizing marketing and even electioneering. I don't believe LinkedIn and Facebook are not strictly comparable. According to its Product Segmentation on Bloomberg LinkedIn is more about headhunting and finding a job than marketing. Facebook is not a subscription site and depends almost entirely on advertising. As a result, Facebook is probably more comparable with Google than LinkedIn.