New Tulip Mania?

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fingoals
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New Tulip Mania?

Post by fingoals »

Recently I have read about two recent IPOs: ZoomInfo Technologies and Nikola Motors. A brief look at the former reveals that it trades at P/E ratio of almost 400, whereas the former's P/E is literally infinity, since it has no revenue yet. With this in mind, I'm wondering about whether we are approaching (or have already approached) a bubble, as such companies' metrics (e.g., P/E and valuation) appear to be tulip mania-level insane.
Teague
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Re: New Tulip Mania?

Post by Teague »

Well, it would be a really limited sort of bubble if we're only talking about 2 companies. There's always something wonky going on, today I guess it's those two.
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JoMoney
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Re: New Tulip Mania?

Post by JoMoney »

While I do think an increase in IPO's of dubious quality is a symptom of stock market "bubbles", a sample size of 2 doesn't it make it so.
The data I've seen has been talking about a slow-down in recent IPO's
https://insight.factset.com/u.s.-ipo-ma ... le-markets
Most of the chatter I keep hearing has been about big pay-days from private equity deals (not public IPOs).

And despite that lack of earnings, I don't see either of those companies as being "dubious", they're serious competitors in their respective markets with real potential.
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Re: New Tulip Mania?

Post by bogledogle »

Have you seen HTZ? It's crazy.
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fingoals
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Re: New Tulip Mania?

Post by fingoals »

Teague wrote: Tue Jun 09, 2020 8:43 pm Well, it would be a really limited sort of bubble if we're only talking about 2 companies. There's always something wonky going on, today I guess it's those two.
Fair enough. But I mentioned those two companies just as some of most recent examples - I'm pretty sure there are some other similar companies.
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Re: New Tulip Mania?

Post by muddlehead »

I think the real tulip-mania is occurring in the sports card market. Yup, those little pieces of cardboard. Generally, prices have tripled or more the past three months. Never seen anything like it in any market, ever.
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fingoals
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Re: New Tulip Mania?

Post by fingoals »

JoMoney wrote: Tue Jun 09, 2020 8:51 pm While I do think an increase in IPO's of dubious quality is a symptom of stock market "bubbles", a sample size of 2 doesn't it make it so.
The data I've seen has been talking about a slow-down in recent IPO's
https://insight.factset.com/u.s.-ipo-ma ... le-markets
Most of the chatter I keep hearing has been about big pay-days from private equity deals (not public IPOs).

And despite that lack of earnings, I don't see either of those companies as being "dubious", they're serious competitors in their respective markets with real potential.
Well, I mentioned those two companies just as some of most recent examples - I'm pretty sure there are some other similar companies. I don't think that the companies I mentioned are necessarily "dubious", but rather extremely overvalued. By the way, it's only Nikola Motors that lacks earnings, not ZoomInfo.

As for IPOs slowdown (thank you for the link), it appears that the trend has more recently reversed: https://www.marketwatch.com/story/ipo-m ... 2020-06-08.
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Re: New Tulip Mania?

Post by dukeblue219 »

fingoals wrote: Tue Jun 09, 2020 7:45 pm Recently I have read about two recent IPOs: ZoomInfo Technologies and Nikola Motors. A brief look at the former reveals that it trades at P/E ratio of almost 400, whereas the former's P/E is literally infinity, since it has no revenue yet. With this in mind, I'm wondering about whether we are approaching (or have already approached) a bubble, as such companies' metrics (e.g., P/E and valuation) appear to be tulip mania-level insane.
Are those numbers completely abnormal for IPOs? We're usually talking about young, growing companies that aren't profitable yet. When was the first time Amazon had a positive P/E?
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Re: New Tulip Mania?

Post by JonnyB »

It's not unusual for promising IPOs to have very high PEs because they haven't yet made a profit. Amazon and Tesla are examples. In contrast, in 2000 you knew there was a bubble because they were doing billions in IPOs for companies that not only never had turned a profit, they had never sold anything or received a dime in sales. All they had was a .COM domain and a fairy tale story.
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Re: New Tulip Mania?

Post by fingoals »

muddlehead wrote: Tue Jun 09, 2020 9:58 pm I think the real tulip-mania is occurring in the sports card market. Yup, those little pieces of cardboard. Generally, prices have tripled or more the past three months. Never seen anything like it in any market, ever.
I'm not an expert on sports cards, but I think that such market is similar to art-focused markets (e.g., collectibles, philately, paintings, sculpture), where value is not based on any economic criteria.
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Re: New Tulip Mania?

Post by fingoals »

dukeblue219 wrote: Tue Jun 09, 2020 10:05 pm
fingoals wrote: Tue Jun 09, 2020 7:45 pm Recently I have read about two recent IPOs: ZoomInfo Technologies and Nikola Motors. A brief look at the former reveals that it trades at P/E ratio of almost 400, whereas the former's P/E is literally infinity, since it has no revenue yet. With this in mind, I'm wondering about whether we are approaching (or have already approached) a bubble, as such companies' metrics (e.g., P/E and valuation) appear to be tulip mania-level insane.
Are those numbers completely abnormal for IPOs? We're usually talking about young, growing companies that aren't profitable yet. When was the first time Amazon had a positive P/E?
Perhaps, you're right. However, IMO to lack profit is one thing and to lack any revenue / earnings (cf., Nikola) is another.
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fingoals
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Re: New Tulip Mania?

Post by fingoals »

JonnyB wrote: Tue Jun 09, 2020 10:07 pm It's not unusual for promising IPOs to have very high PEs because they haven't yet made a profit. Amazon and Tesla are examples. In contrast, in 2000 you knew there was a bubble because they were doing billions in IPOs for companies that not only never had turned a profit, they had never sold anything or received a dime in sales. All they had was a .COM domain and a fairy tale story.
I agree. But this is exactly my point, at least, regarding Nikola Motors - they have no revenue / earnings (I'm not talking about profit here) and even not any finished product ... Unlike early Amazon and Tesla.
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Re: New Tulip Mania?

Post by mbasherp »

I think Nikola Motors is going to be successful with a lot of their ventures. I understand the hype; it’s pretty standard for new companies like that. Retail trader hype, etc. Their products and technology are unique and I personally see fuel cells as the future, even more than EVs.

I’m not buying a bunch of shares at this price, but I do expect the company to do well. If it were to drop significantly, I might buy some with my stock picking portion of my Roth IRA.
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Re: New Tulip Mania?

Post by fingoals »

mbasherp wrote: Tue Jun 09, 2020 10:34 pm I think Nikola Motors is going to be successful with a lot of their ventures. I understand the hype; it’s pretty standard for new companies like that. Retail trader hype, etc. Their products and technology are unique and I personally see fuel cells as the future, even more than EVs.

I’m not buying a bunch of shares at this price, but I do expect the company to do well. If it were to drop significantly, I might buy some with my stock picking portion of my Roth IRA.
Thank you for sharing your thoughts. My point is not about such companies' potential success - which very well might be the case in some/many instances, but rather about them being overvalued (that is, too much overvalued, considering relevant risks of very early ventures).
am
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Re: New Tulip Mania?

Post by am »

I saw nakd penny stock go up 140% today for no reason I could find. Company is not doing well either. There is always craziness in the markets if you look.
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fingoals
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Re: New Tulip Mania?

Post by fingoals »

am wrote: Tue Jun 09, 2020 10:57 pm I saw nakd penny stock go up 140% today for no reason I could find. Company is not doing well either. There is always craziness in the markets if you look.
Thank you for your comment. It is difficult to disagree with your statement above that I took liberty to emphasize in bold.
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Re: New Tulip Mania?

Post by DonIce »

fingoals wrote: Tue Jun 09, 2020 10:55 pm
mbasherp wrote: Tue Jun 09, 2020 10:34 pm I think Nikola Motors is going to be successful with a lot of their ventures. I understand the hype; it’s pretty standard for new companies like that. Retail trader hype, etc. Their products and technology are unique and I personally see fuel cells as the future, even more than EVs.

I’m not buying a bunch of shares at this price, but I do expect the company to do well. If it were to drop significantly, I might buy some with my stock picking portion of my Roth IRA.
Thank you for sharing your thoughts. My point is not about such companies' potential success - which very well might be the case in some/many instances, but rather about them being overvalued (that is, too much overvalued, considering relevant risks of very early ventures).
Personally, I think Nikola is an outright fraud. You heard it here first.
Zillions
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Re: New Tulip Mania?

Post by Zillions »

DonIce wrote: Tue Jun 09, 2020 11:44 pm
fingoals wrote: Tue Jun 09, 2020 10:55 pm
mbasherp wrote: Tue Jun 09, 2020 10:34 pm I think Nikola Motors is going to be successful with a lot of their ventures. I understand the hype; it’s pretty standard for new companies like that. Retail trader hype, etc. Their products and technology are unique and I personally see fuel cells as the future, even more than EVs.

I’m not buying a bunch of shares at this price, but I do expect the company to do well. If it were to drop significantly, I might buy some with my stock picking portion of my Roth IRA.
Thank you for sharing your thoughts. My point is not about such companies' potential success - which very well might be the case in some/many instances, but rather about them being overvalued (that is, too much overvalued, considering relevant risks of very early ventures).
Personally, I think Nikola is an outright fraud. You heard it here first.
Any reason why you think this? Just curious to hear your reasoning. Thanks!
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Re: New Tulip Mania?

Post by fingoals »

DonIce wrote: Tue Jun 09, 2020 11:44 pm
fingoals wrote: Tue Jun 09, 2020 10:55 pm
mbasherp wrote: Tue Jun 09, 2020 10:34 pm I think Nikola Motors is going to be successful with a lot of their ventures. I understand the hype; it’s pretty standard for new companies like that. Retail trader hype, etc. Their products and technology are unique and I personally see fuel cells as the future, even more than EVs.

I’m not buying a bunch of shares at this price, but I do expect the company to do well. If it were to drop significantly, I might buy some with my stock picking portion of my Roth IRA.
Thank you for sharing your thoughts. My point is not about such companies' potential success - which very well might be the case in some/many instances, but rather about them being overvalued (that is, too much overvalued, considering relevant risks of very early ventures).
Personally, I think Nikola is an outright fraud. You heard it here first.
Hmm... I'm not sure about such a radical stance on it, but you're definitely not alone: https://www.reddit.com/r/investing/comm ... _is_trevor.
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Re: New Tulip Mania?

Post by DonIce »

Zillions wrote: Tue Jun 09, 2020 11:52 pm
DonIce wrote: Tue Jun 09, 2020 11:44 pm
fingoals wrote: Tue Jun 09, 2020 10:55 pm
mbasherp wrote: Tue Jun 09, 2020 10:34 pm I think Nikola Motors is going to be successful with a lot of their ventures. I understand the hype; it’s pretty standard for new companies like that. Retail trader hype, etc. Their products and technology are unique and I personally see fuel cells as the future, even more than EVs.

I’m not buying a bunch of shares at this price, but I do expect the company to do well. If it were to drop significantly, I might buy some with my stock picking portion of my Roth IRA.
Thank you for sharing your thoughts. My point is not about such companies' potential success - which very well might be the case in some/many instances, but rather about them being overvalued (that is, too much overvalued, considering relevant risks of very early ventures).
Personally, I think Nikola is an outright fraud. You heard it here first.
Any reason why you think this? Just curious to hear your reasoning. Thanks!
The reddit thread someone linked about sums it up. Here's some of the most obvious red flags:

1. Lack of the technical talent to accomplish what they are trying to accomplish.
2. Lack of any indication they have made any substantial progress towards a real product.
3. Bypassing of the traditional IPO process's scrutiny, instead listing via merger with a shell company specifically created for the purpose.
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Re: New Tulip Mania?

Post by dukeblue219 »

Have to admit being an electrical engineer and part time tech nerd that I'd never heard of Nikola until yesterday. Now I'm looking at it all and I can't help but think anything but Theranos.

This is sketchy as all hell.
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Re: New Tulip Mania?

Post by firebirdparts »

When all those bankrupt company stocks shot up, I had this idea (and I wasn't the only one) that Hertz shares could continue to trade (forever) just like bitcoin, only better. There's no transaction cost, and it's pretty much secure and unhackable. The superiority is that it's already scaled up and it doesn't take oodles of electricity.
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Re: New Tulip Mania?

Post by ohboy! »

muddlehead wrote: Tue Jun 09, 2020 9:58 pm I think the real tulip-mania is occurring in the sports card market. Yup, those little pieces of cardboard. Generally, prices have tripled or more the past three months. Never seen anything like it in any market, ever.
Really?? I took a bunch of late 80s and early 90s cards to a dealer a month ago and they told me it's worth nothing. I had tons of basketball, football, and baseball in good condition. All the big names.
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Re: New Tulip Mania?

Post by ohboy! »

Uber is worth $60B right now. I really question their business future. Market doesn't seem to care. I have a hard time understanding most stocks market caps when they don't pay a dividend and are worth exponential factors of annual profits. The majority of the "economy" seems to exist in future potential to me.
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Re: New Tulip Mania?

Post by am »

ohboy! wrote: Wed Jun 10, 2020 11:56 am
muddlehead wrote: Tue Jun 09, 2020 9:58 pm I think the real tulip-mania is occurring in the sports card market. Yup, those little pieces of cardboard. Generally, prices have tripled or more the past three months. Never seen anything like it in any market, ever.
Really?? I took a bunch of late 80s and early 90s cards to a dealer a month ago and they told me it's worth nothing. I had tons of basketball, football, and baseball in good condition. All the big names.
I’m thinking early to mid 80s stuff has been doing real well on eBay auctions, especially wax boxes which I collect. An 83 topps wax box was recently auctioned for 1k or so which is a significant change higher.
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Re: New Tulip Mania?

Post by HomeStretch »

Lol I opened this thread thinking it was another gardening thread! [Yes, I understand the reference to tulip mania.]
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Re: New Tulip Mania?

Post by muddlehead »

[quote=ohboy! post_id=5305272 time=1591808203 user_id=128903]
[quote=muddlehead post_id=5304382 time=1591757906 user_id=10077]
I think the real tulip-mania is occurring in the sports card market. Yup, those little pieces of cardboard. Generally, prices have tripled or more the past three months. Never seen anything like it in any market, ever.
[/quote]

Really?? I took a bunch of late 80s and early 90s cards to a dealer a month ago and they told me it's worth nothing. I had tons of basketball, football, and baseball in good condition. All the big names.
[/quote]


Yup. Watch the movie documentary "Jack of All Trades" and you'll understand why your late '80's / early '90's cards are worthless. The movie is outstanding in every way.
muddlehead
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Re: New Tulip Mania?

Post by muddlehead »

[quote=am post_id=5305663 time=1591816849 user_id=3539]
[quote=ohboy! post_id=5305272 time=1591808203 user_id=128903]
[quote=muddlehead post_id=5304382 time=1591757906 user_id=10077]
I think the real tulip-mania is occurring in the sports card market. Yup, those little pieces of cardboard. Generally, prices have tripled or more the past three months. Never seen anything like it in any market, ever.
[/quote]

Really?? I took a bunch of late 80s and early 90s cards to a dealer a month ago and they told me it's worth nothing. I had tons of basketball, football, and baseball in good condition. All the big names.
[/quote]

I’m thinking early to mid 80s stuff has been doing real well on eBay auctions, especially wax boxes which I collect. An 83 topps wax box was recently auctioned for 1k or so which is a significant change higher.
[/quote]

Yup. It's the late 80's / early '90's cards that were overproduced, to say the least, that are laggards. Watch the movie documentary "Jack of All Trades." Terrific tale.
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Re: New Tulip Mania?

Post by Valuethinker »

fingoals wrote: Tue Jun 09, 2020 7:45 pm Recently I have read about two recent IPOs: ZoomInfo Technologies and Nikola Motors. A brief look at the former reveals that it trades at P/E ratio of almost 400, whereas the former's P/E is literally infinity, since it has no revenue yet. With this in mind, I'm wondering about whether we are approaching (or have already approached) a bubble, as such companies' metrics (e.g., P/E and valuation) appear to be tulip mania-level insane.
It appears the latter is a reverse listing. That's a huge red flag (as poster up thread correctly points out). The valuation is likely spurious (excessive demand with too few free-floating shares). Something similar happened when Palm was separated out from 3Com.

The former? It's a way of playing the Covid-19 situation - but countries are now coming out of lockdown (although the evidence from China, Singapore etc is that they will rapidly go back into lockdown at least in specific locations). I haven't see any brokers research which discusses the fundamentals, to get a sense whether it can just be competed away by the big boys of the internet. It's usually when FB or Google or Amazon or MSFT offers an alternative product and just crushes some green startup. Or buys it. ( I know about Google Meeting & MS Teams, just not sure re competitive positioning).

EDIT: I confused Zoom and ZoomInfo
Last edited by Valuethinker on Mon Jul 20, 2020 11:07 am, edited 1 time in total.
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Re: New Tulip Mania?

Post by fingoals »

Valuethinker wrote: Mon Jun 15, 2020 11:34 am
fingoals wrote: Tue Jun 09, 2020 7:45 pm Recently I have read about two recent IPOs: ZoomInfo Technologies and Nikola Motors. A brief look at the former reveals that it trades at P/E ratio of almost 400, whereas the former's P/E is literally infinity, since it has no revenue yet. With this in mind, I'm wondering about whether we are approaching (or have already approached) a bubble, as such companies' metrics (e.g., P/E and valuation) appear to be tulip mania-level insane.
It appears the latter is a reverse listing. That's a huge red flag (as poster up thread correctly points out). The valuation is likely spurious (excessive demand with too few free-floating shares). Something similar happened when Palm was separated out from 3Com.

The former? It's a way of playing the Covid-19 situation - but countries are now coming out of lockdown (although the evidence from China, Singapore etc is that they will rapidly go back into lockdown at least in specific locations). I haven't see any brokers research which discusses the fundamentals, to get a sense whether it can just be competed away by the big boys of the internet. It's usually when FB or Google or Amazon or MSFT offers an alternative product and just crushes some green startup. Or buys it. ( I know about Google Meeting & MS Teams, just not sure re competitive positioning).
Thank you for sharing your thoughts.
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Re: New Tulip Mania?

Post by dukeblue219 »

Valuethinker wrote: Mon Jun 15, 2020 11:34 am
The former? It's a way of playing the Covid-19 situation - but countries are now coming out of lockdown (although the evidence from China, Singapore etc is that they will rapidly go back into lockdown at least in specific locations). I haven't see any brokers research which discusses the fundamentals, to get a sense whether it can just be competed away by the big boys of the internet. It's usually when FB or Google or Amazon or MSFT offers an alternative product and just crushes some green startup. Or buys it. ( I know about Google Meeting & MS Teams, just not sure re competitive positioning).
ZoomInfo is not related to the Zoom Video company. It's a marketing SaaS company.
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Re: New Tulip Mania?

Post by wfrobinette »

ohboy! wrote: Wed Jun 10, 2020 11:56 am
muddlehead wrote: Tue Jun 09, 2020 9:58 pm I think the real tulip-mania is occurring in the sports card market. Yup, those little pieces of cardboard. Generally, prices have tripled or more the past three months. Never seen anything like it in any market, ever.
Really?? I took a bunch of late 80s and early 90s cards to a dealer a month ago and they told me it's worth nothing. I had tons of basketball, football, and baseball in good condition. All the big names.
Sets or just random opened packs?
dukeblue219
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Re: New Tulip Mania?

Post by dukeblue219 »

Nikola is down 58% from its peak in June when this thread was posted. Down 20% today alone. Yikes.
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Re: New Tulip Mania?

Post by Valuethinker »

dukeblue219 wrote: Mon Jun 15, 2020 1:14 pm
Valuethinker wrote: Mon Jun 15, 2020 11:34 am
ZoomInfo is not related to the Zoom Video company. It's a marketing SaaS company.
Right. My bad. Will fix. Thank you.
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Re: New Tulip Mania?

Post by fingoals »

dukeblue219 wrote: Mon Jul 20, 2020 10:17 am Nikola is down 58% from its peak in June when this thread was posted. Down 20% today alone. Yikes.
Yes, pretty scary (though, in this case, mostly predictable) volatility. Just another reminder of how risky individual stock investing might be ... On the other hand, the same could have been said when MSFT, AMZN, TSLA and other "rocketships" have just IPOed. Those who have invested in those stocks back then and held them, are very unlikely to complain. Hindsight is always 20/20 ... :twisted:
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Re: New Tulip Mania?

Post by nisiprius »

Oh, darn. I was hoping there was something happening literally with tulips.

There was a mania--bubble does not seem like a strong enough word--in Hertz Global Holdings, HTZ, a company that has filed for bankruptcy--people think it is likely to be liquidated, not even reorganized--but in any case the stock would likely become worthless. Yet this happened:

Image

The financial press seems to think this was caused by Robinhood investors who literally had no idea what they were doing, and buying the stock simply because they saw the price going up... rather than shrewd gamblers who seriously thought or think there is a long-shot chance of Hertz surviving.

The stock market is an inextricable mixture of pure folly, of simple gambling with chances of both winning and losing, and a virtuous mechanism for raising capital and allocating it to the most worthwhile enterprises.

I don't think the stock market itself, as a whole, is often in full-bore mania mode, but I certainly think it was circa 2000. And when I read the accounts of 1929--the were days when vast crowds packed Wall Street because they just wanted to be there where it was happening, "it" being the apparently miraculous creation of vast wealth--there's no doubt in my mind that that was a true mania.
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Re: New Tulip Mania?

Post by bigskyguy »

nisiprius wrote: Tue Jul 21, 2020 7:21 am
The stock market is an inextricable mixture of pure folly, of simple gambling with chances of both winning and losing, and a virtuous mechanism for raising capital and allocating it to the most worthwhile enterprises.
Must say that this may be the most succinct expression of the markets that I've ever seen written. Well done, and thanks.
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Re: New Tulip Mania?

Post by Strayshot »

Nikola is brilliant. Take the first name and play off the hype that has insanely overvalued Tesla. Doesn’t even matter what/if they produce. Same thing as when everyone got into bitcoin regardless of what they did beforehand and pumped stock prices. Or when everyone pumped the defunct Chinese Zoom instead of the actual Zoom.
I don’t know that it is a new Tulip Mania or just stupid people doing stupid things same as always.
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Re: New Tulip Mania?

Post by KyleAAA »

Both are actual companies with revenue and/or real economic potential. Tulips never had either, and never had any prospects for either, since they were tulips. No, it isn't anything like tulip mania. Bubble != Tulip Mania.
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Re: New Tulip Mania?

Post by nisiprius »

KyleAAA wrote: Tue Jul 21, 2020 11:08 am Both are actual companies with revenue and/or real economic potential. Tulips never had either, and never had any prospects for either, since they were tulips. No, it isn't anything like tulip mania. Bubble != Tulip Mania.
I can't agree with that. There are actual companies with revenue and economic potential that produce an intangible product whose value depends mostly on connoisseur appreciation. For example, sports memorabilia is a multibillion dollar market--it's been estimated at $5.4 billion, but even if that's an exaggeration it's a lot. There's every reason to think that the privately-held Upper Deck Company is a substantial business. It deals in physical objects but the value of those objects is mostly in the curatorship, the buyer's trust in the accuracy and honesty of Upper Deck's record keeping, in presentation elements (elegant-looking frames and holders), and, above all, the highly intangible mystical quality from knowing that this ball was in a certain game. For example, one ball used by Sammy Sosa in a specific game in 2004 is priced at $77.96, while a brand-new MLB-grade baseball costs less than $20 (and presumably much less if used!)

There are many other examples of legitimate businesses where the intrinsic value of the product is mostly in the belief of the buyer; the legitimate businesses dealing in it are mostly dealing in honesty, record-keeping, and knowledge of the market; and the dollar value depends essentially on the belief that someone else would be willing to buy it for approximately what you paid for it. The value of a pedigreed dog is some complicated mix of "a judgement of what someone else would pay for it" and "a knowledgeable guess at how a dog show judge would judge it."

All that happens is that the dollar value of the business gets pushed back a step. Apple may be manufacturing iPhones, but the value of the stock depends on how many of them you think it can sell and how much it can sell them for. Very well, the tulip merchant is also in a business, and your judgement of the value is your judgement of how many tulips you think the merchant can sell it how much it can sell them for.

Of course, the higher the amount of "intangibles" and "greater fool" theory there is, then the less stable prices and judgements of value are. But a 1637 Dutch tulip merchant did have actual product to sell and actual revenue. It's not an absolute difference. You just happen to have less faith in the ability of the merchant to sustain a stable level of business at those prices than you do in some speculative high-tech companies.
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rich126
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Re: New Tulip Mania?

Post by rich126 »

The big money (and huge speculation) is being made on the SaaS stocks. For example look at WCLD etf (cloud companies). It is up 52% this year. zoom $69 to $261. There are people making huge amounts of money on those stocks. Obviously large amount of speculation although that was also true of stocks like Netflix, Facebook, Amazon, etc.

A lot of "Robinhood" people involved. Eventually it will collapse for many of those stocks but a few will survive.

Unfortunately (at this time), I'm mostly sitting back and watching.
milktoast
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Re: New Tulip Mania?

Post by milktoast »

Maybe people are getting confused about ZM, ZI, ZOOM. Three different tickers for three different companies, all named Zoom.
Valuethinker
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Re: New Tulip Mania?

Post by Valuethinker »

milktoast wrote: Tue Jul 21, 2020 1:26 pm Maybe people are getting confused about ZM, ZI, ZOOM. Three different tickers for three different companies, all named Zoom.
There is quite a lot of academic research that this is precisely what does happen.
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Vulcan
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Re: New Tulip Mania?

Post by Vulcan »

Valuethinker wrote: Tue Jul 21, 2020 2:05 pm
milktoast wrote: Tue Jul 21, 2020 1:26 pm Maybe people are getting confused about ZM, ZI, ZOOM. Three different tickers for three different companies, all named Zoom.
There is quite a lot of academic research that this is precisely what does happen.
SEC even stopped trading on it back in late March

https://www.cnbc.com/2020/03/26/sec-pau ... video.html
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wootwoot
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Re: New Tulip Mania?

Post by wootwoot »

Is speculative trading equivalent to tulip mania?
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Re: New Tulip Mania?

Post by KyleAAA »

nisiprius wrote: Tue Jul 21, 2020 12:27 pm
KyleAAA wrote: Tue Jul 21, 2020 11:08 am Both are actual companies with revenue and/or real economic potential. Tulips never had either, and never had any prospects for either, since they were tulips. No, it isn't anything like tulip mania. Bubble != Tulip Mania.
I can't agree with that. There are actual companies with revenue and economic potential that produce an intangible product whose value depends mostly on connoisseur appreciation. For example, sports memorabilia is a multibillion dollar market--it's been estimated at $5.4 billion, but even if that's an exaggeration it's a lot. There's every reason to think that the privately-held Upper Deck Company is a substantial business. It deals in physical objects but the value of those objects is mostly in the curatorship, the buyer's trust in the accuracy and honesty of Upper Deck's record keeping, in presentation elements (elegant-looking frames and holders), and, above all, the highly intangible mystical quality from knowing that this ball was in a certain game. For example, one ball used by Sammy Sosa in a specific game in 2004 is priced at $77.96, while a brand-new MLB-grade baseball costs less than $20 (and presumably much less if used!)

There are many other examples of legitimate businesses where the intrinsic value of the product is mostly in the belief of the buyer; the legitimate businesses dealing in it are mostly dealing in honesty, record-keeping, and knowledge of the market; and the dollar value depends essentially on the belief that someone else would be willing to buy it for approximately what you paid for it. The value of a pedigreed dog is some complicated mix of "a judgement of what someone else would pay for it" and "a knowledgeable guess at how a dog show judge would judge it."

All that happens is that the dollar value of the business gets pushed back a step. Apple may be manufacturing iPhones, but the value of the stock depends on how many of them you think it can sell and how much it can sell them for. Very well, the tulip merchant is also in a business, and your judgement of the value is your judgement of how many tulips you think the merchant can sell it how much it can sell them for.

Of course, the higher the amount of "intangibles" and "greater fool" theory there is, then the less stable prices and judgements of value are. But a 1637 Dutch tulip merchant did have actual product to sell and actual revenue. It's not an absolute difference. You just happen to have less faith in the ability of the merchant to sustain a stable level of business at those prices than you do in some speculative high-tech companies.
I wouldn't quibble with the valuation of tulip merchants. I quibble with the idea that a company selling something, even if the value is highly subjective (such as tulips or baseball cards), is comparable to the valuation of tulip bulbs themselves. They are not comparable. There may very well be a trading card bubble, but that has nothing to do with whether or not there is a stock market bubble just because a trading card manufacturer happens to trade on one.
Last edited by KyleAAA on Wed Jul 22, 2020 11:21 am, edited 1 time in total.
Valuethinker
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Re: New Tulip Mania?

Post by Valuethinker »

wootwoot wrote: Tue Jul 21, 2020 2:29 pm Is speculative trading equivalent to tulip mania?
Academic literature talks about "noise traders" who do not trade on fundamentals.

Such speculative traders can cause bubbles, with rational traders (hedge funds) jumping on the bandwagon rather than acting against the bubble (by, say, short selling).
Valuethinker
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Re: New Tulip Mania?

Post by Valuethinker »

nisiprius wrote: Tue Jul 21, 2020 12:27 pm

Of course, the higher the amount of "intangibles" and "greater fool" theory there is, then the less stable prices and judgements of value are. But a 1637 Dutch tulip merchant did have actual product to sell and actual revenue. It's not an absolute difference. You just happen to have less faith in the ability of the merchant to sustain a stable level of business at those prices than you do in some speculative high-tech companies.
And the Dutch still dominate the tulip bulb business. So those companies, in some descended form, are still around.

If you trade by volume shipped, your profits may not be directly linked by value.

If you trade by value shipped, it will. So if there's a bubble in the market for what you ship, you will do better. Thinking gold & silver traders during run-ups in those prices.
CurlyDave
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Re: New Tulip Mania?

Post by CurlyDave »

JonnyB wrote: Tue Jun 09, 2020 10:07 pm It's not unusual for promising IPOs to have very high PEs because they haven't yet made a profit. Amazon and Tesla are examples. In contrast, in 2000 you knew there was a bubble because they were doing billions in IPOs for companies that not only never had turned a profit, they had never sold anything or received a dime in sales. All they had was a .COM domain and a fairy tale story.
The other problem in 2000 was that there were companies with obviously limited total markets and outrageous valuations. The specific one that comes to mind is pets.com. I don't care how much of the total market for pet food and supplies you think they are going to get, the total market is much lower than for Amazon or Tesla.

The other issue was that just selling anything on the internet made an outfit a tech company in 2000, even if it was a very low-tech product. When Amazon started, it was selling books. The total value was limited. The switch to being a general retailer and technology company is what created value.
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