While the “stock market” continues to flirt with new records, there’s turmoil under the surface. High-flying social media companies Twitter and LinkedIn fell hard in late April, and now recent IPO Etsy, an online marketplace for arts and crafts, is down 50% since going public (8% of that today).
Bull markets don’t end all at once. Generally a few egregiously-overvalued sectors blow up first and are dismissed by most observers as aberrations. Instead, they turn out to be a sign of things to come.
In the previous decade’s bubble it was subprime housing that led the way, while being initially characterized by experts as too small to matter. Click here for Ben Bernanke’s ongoing attempts to convince the world to relax and ignore housing’s problems.
This time around we of course won’t know until after the fact which sector is the canary in the coal mine. But these epic fails in the bubbly social media/online marketplace region of tech certainly look like viable candidates.
So…why these companies at this time?
So that’s the tech tank story. Now we’ll see whether it becomes the story of the market in general.
What is Etsy but the craft world of eBay, selling junk no one needs to people who have no savings anyway? How many pink poodle beaded shoulder bags can one person buy?
Right you are! Let’s all line up at Walmart and get our plastic, mass-manufactured goods from giant corporations servicing our consumer needs. Good vision of the world. Artisanal goods are terrible things.
You misunderstand. My point is not a dig at ‘artisan goods’, but one at the idea that a mass mover like eBay has a hard time making good numbers. How can Etsy do better with more ‘stuff’ that is less ‘needed’? It’s all about discretionary income. Or lack thereof…
It appears there is too much cash and a lot of people creating sketchy businesses to soak up that cash. Then one day poof they will be gone! Just makes the markets that more unstable. The plunge protection team will have a lot of sleepless nights.
Wait until QE4ever. The fat lady won’t sing until every possible strategy by every major central bank has been done to death. I was shocked to learn that China’s prime rate is still over 5%. A huge amount of monetary easing is still possible. Japan still hasn’t monetized all of their debt, nor has the ECB and the SNB, and the UK is still standing too. And, let’s face it, does anyone really think we won’t see literal “helicopter” money before this is over? This Canary series will have a lot of contenders.