Tech bubble? Pah. IPOs just return cash to early-stage investors A internal presentation from Andreessen Horowitz aimed at its limited partners, that has to be taken with the appropriate shovelful of salt, has emerged – and the insights it reveals into the “tech bubble” are absolutely fascinating. U.S. Technology Funding -- What's Going On? from a16z Take it with a shovelful of salt …
Speaking as a layman I think the oil that is there will continue to be extracted until becomes too expensive to extract and sell for a profit. This may be because there's not much left, or that other energy sources are cheaper than oil at a certain price point. This arguably is as good as an infinite supply of oil I guess; oil is likely to become too expensive before it runs out.
So only those in the club get the profits, and there are rules about who can be in the club.
Meanwhile the great unwashed, buying shares on the public market, or with pensions invested in the public market don't see an of the profits.
I seem to remember that capitalism was good because it efficiently redistributed wealth between losers and winners, tis looks a lot more like feudalism
Well, I know Anthony reasonably well, have done a number of trades with him, and wrote the MMTA standard contract for scandium (one of the rare earths) for him when he was Chairman there.
So, of course, he's entirely correct.
I might change a little of the nuance but not all that much.
Your description of the US market sounds like one that's moving closer to the UK model, where the stockmarket won't generally support an IPO until you're a fair bit more mature than two years, and on the other side, early-stage investors benefit from tax breaks that require them to hold longer-term. And where mature companies have traditionally paid out more in dividends than US ones.
... during an IPO because of the pump and dump scams operated by the teams involved here to artificially inflate the value of worthless companies - those with no revenue stream or profit, yet manufactured to be 'worth' billions.
http://www.rollingstone.com/politics/news/the-great-american-bubble-machine-20100405
So... what you're saying is, you have a bunch of companies which don't actually make any money, and the late-stage investors money is used to pay off earlier investors with interest. And that's fine and dandy, and how capitalism works now.
Oh, wait, no, that was what Bernie Madoff was doing, wasn't it? Silly me. I get so confused between 'perfectly fine market operations' and 'highly illegal fraudulent ponzi schemes'.
1) The companies aren't profitable, this is apparent to the careful reader, but muppet investors stampede in anyway
2) They aren't profitable but fake it wildly
3) They are profitable but rather closer to sedate middle-age: making money but already big so long past the stage of buy-5%-of-next-megacorp-for-a-pittance
You'll note that the second case is Madoff, whereas what's being talked about here is the third...
Established companies started to buy back their own shares to a. return shareholder value (in individual share price rise) b. trigger bonuses based on share price.
The same companies then borrow against the company and again buy more of their own shares (increasing each shares price but not its value)
The last stage is to IPO which dilutes the share price/value and releases capital to the existing shareholders, they then leave the building leaving the retail investors holding the bag.
Pump'n'Dump or Bait'n'Switch it all amounts to the same thing.
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