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back to article November election sends chill down Valley shareholders' necks

Across Silicon Valley, internet biz stocks are taking a beating as the market reacts to serious challenges at Zynga and elsewhere. Unfortunately, it may well get worse. Due to the expected rise in US long-term capital gains tax rates under President Obama, the pressure on all technology stocks may hit new highs from the November …

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Facebook?

I wouldn't consider them to be a technology company. They are a data/advertisement broker.

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Re: Facebook?

But you don't know what you're talking about, so sharing your opinion wasn't really worthwhile except to feel important your words are on the internet.

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Meh

Re: Facebook?

"But you don't know what you're talking about, so sharing your opinion wasn't really worthwhile except to feel important your words are on the internet."

Now, that's what Facebook is for.

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Re: Facebook?

At least with FB the only people who see your post are those who have indicated they might care what you think.

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Genuine question

Why are there so many shares? Why have there be 2.5bn shares in Facebook at US$20 each. Why not have 0.25bn at US$200 each? Do they actually need the granularity of going down to single shares? They don't have that many employees so why? I would have thought you could knock a few orders of magnitude off that and make it a little simpler. Is it for psychological reasons? Would $200 a share look too overinflated (yeah, like $40 did not! ).

Incidentally, P/E for Facebook is still around 67, which is terrifying for a stock on decline. It indicates to my mind that the price is still seriously over-inflated.

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Re: Genuine question

If by overinflated you mean worthless then i'd agree, and so, probably would many of the people who predicted just such a crash in the stock price of a company with a billion customers, none of whom buy anything from them

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Re: Genuine question

I'm sure lots of the same people predicted Google would collapse too, and every established web-based company from this century.

The fact some idiots got one right is more statistics than useful analysis. And as FB turns a substantial profit, 'idiot' is the right word for anyone who thinks it is worthless.

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" a company with a billion customers"

As has been frequently pointed out on El Reg, Facebook has a billion USERS not a billion CUSTOMERS. Customers are the people who pay you, so really Facebook's customers are the advertisers, game developers etc,, and what the advertisers, developers etc buy (ie Facebook's product) is access to users. Users are FBs products not their customers.

P/E of 67 is shocking, I think it's because most people buying the stock were targeting a quick capital-gains buck rather than long-term earnings. A big sell-out lowering the price considerably would actually make the stock quite attractive to investors counting on Facebook being able to monetise it's user base even further in the future. It's a big risk, but offset by the possibility of a huge reward if FB can double or triple it's revenue over the next few years

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Facepalm

Technology company?

Maybe what we need is a new category. I mean HP, Intel. TI, Samsung, Sony, those are technology companies, maybe even Apple and Microsoft, but seriously Facebook? Does that make anyone with a website and a little scripting a technology company? Really? How about a new group of companies, tech leeches or something similar, maybe soft tech, something that makes people understand that there is no actual technology innovated by these companies, it is just used there....

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Anonymous Coward

There is no doubt about it

Bama-nomics is bad for America and the world. If you don't think so check the real unemployment figures, the business closings, the lost jobs, the lost tax revenues, the increase cost of everything from food to utilities - all under Bama's watch, problems that have occurred and were NOT inherited from Bush - who was not a particularly great president either.

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Mushroom

Re: There is no doubt about it

This isn't really a political forum but what the hell, I'll bite -

Stock prices have soared under Obama, if I'm not mistaken the FTSE has approximately doubled. Businesses are posting record profits

"problems that have occurred and were NOT inherited from Bush" - and I bet you believe in unicorns and fairies, too. Major economic collapse, huge unemployment, 2 unfunded wars in middle east, a tarnished international reputation were all inherited from Bush. The only problem Obama did NOT inherit from Bush was a house and senate full of obstructionist republicans who would rather the whole country go to hell in a handbasket than see Obama take credit for any improvement.

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Re: There is no doubt about it

Actually only a few businesses have profited specifically in recent months - with the elections approaching. Almost all industries except the auto industry have shown significant drops. As we see from other Register stories - computer industry sales are down to levels of 2001. Most businesses have not prospered and in fact many have shuttered their doors. A staggering 30 million people have lost their jobs in the U.S. in the past 4 years. States have gone bankrupt because they had to pay so much in unemployment and social services, with some people having been unemployed for more than two years as there are simply no jobs.

http://www.marketwatch.com/story/pc-market-sees-biggest-sales-drop-since-2001-2012-10-10

The U.S. is definitely not in better shape then it was four years ago and in fact by all accounts it's in much worse shape as far as employment, social care, and economics for most individuals and businesses. Now Obama wants to raise taxes on everyone to try to pay for all the programs that are bankrupt.

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Re: There is no doubt about it

"Bama-nomics is bad for America and the world."

but it worked so well in Greece ...

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Re: There is no doubt about it

@James Micallef

Stock prices are higher and profits are higher, but only numerically. Adjust the numbers for the rampant inflation of the last 3.5 years, and you'll get a much more accurate (and much grimmer) picture.

And, FYI, part of the reason some stocks are so high is because Obama insists on picking winners and losers (more often losers) in the market, and the promise of free money from the government makes stock prices climb.

Also FYI, the rampant inflation is a direct result of Obama's (and Bernake's) policies. Quanitative Easing is a nice way of saying "printing money", and they did it so they could keep buying votes in our horribly damaged political electorate.

As a final FYI, the cornerstones of the collapse in the US were all Democratic initiatives from Democratic administrations gone by, namely Clinton and Carter. But hey, why let silly things like facts get in the way of your witchhunt against those evil and dastardly Republicans.

OK, I lied about the final FYI. This is really it. Obstructionism and gridlock was the best thing for the country. The only REAL economic uptick we've seen is because the market knows that Obama is effectively paralyzed since 2010. Those horrible Republicans stopping Obama from repeating his earlier failed attempts at stupid (but with bigger numbers this time) was the best thing that could have happened. Compare it to stopping an ignorant child from playing with a flamethrower after he just burned down the house playing with matches.

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Mushroom

Every Nation Has The Government It Deserves

That's what you get from the a two-party system which isn't far off from the a communist one-party system like in China, and that's what you voted for. Obama certainly wasn't a stellar president but considering the utter mess left over by it's predecessor Bush, an ex-alcoholic who found god through booze and who the American public considered to be a good representative of their country for two consecutive terms.

The problem is not what happens if Obama is elected. The problem is what happens if Romney is elected. The frightening thing is not that a dimwit millionaire ex-bankster with open disdain for a majority of voters and a fanatic religious zealot are setup as contenders for the highest service of the country, what's really frightening is that such a large part of the American public is actually supporting them. Which in my opinion says a lot about American values.

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Re: There is no doubt about it

" A staggering 30 million people have lost their jobs in the U.S. in the past 4 years."

Even accepting that that number is correct, it's irrelevant. Unemployment rate is now LESS than it was when Obama took office, so however many people lost their jobs, more than that number found new ones. And the data shows clearly that it's Government and State employment that has gone down, while Private sector employment has gone up (so much for the claims that Obama is a 'socialist' intent on expanding government, he's the one who has really shrunk government).

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Mushroom

Re: There is no doubt about it

"rampant inflation" - US inflation is 7% in the last 4 years (http://www.usinflationcalculator.com/), so LESS than 2% per year, hardly 'Rampant', so stocks ARE soaring.

"Obama insists on picking winners and losers" WTF?? You have no idea how an economy works, do you? A president doesn't get to decide which stocks go up and down, nor does he get to decide which companies get government grants. ALL stocks in the US are up, not just those of specific sectors.

"inflation is a direct result of Obama's (and Bernake's) policies" inflation isn't rampant, but I do grant you that 'QE = printing money'. It's not ideal, and higher inflation WILL probably result, but when interest rates are so low it makes sense for the US gov to borrow more. You know what would have been even better? If GWB hadn't spunked away a huge surplus on giving tax rebates to wealthy people and fighting 2 unfunded and unnecessary wars (well OK, te war in Afghanistan was maybe necessary but still unfunded, Iraq was both unnecessary and unfunded). Using QE money to buy votes? You've been watching too much Fox!

"the cornerstones of the collapse in the US were all Democratic initiatives " Hey, I don't have a horse in this race, I'm not even American, but I DO call it as I see it, and I can see what's in front of my nose. Clinton left the US in fantastic financial shape with a huge budget surplus. Bush screwed it up. I don't think Republicans are evil or dasdardly, but they ARE mathematically challenged with respect to budgets. (Hint - If the top tax rate is 80% as it was in Reagan's time, then lowering it WILL increase the economy. When people like Romney are paying 15% tax rate, lowering taxes isn't helping the economy.)

Final FYI - that's bull***t. If that were true, the markets would have tanked / stayed flat 2009-2010 and then soared 2011-2012. In reality the markets had a fairly constant rise, so that's your theory debunked. And I think the matches / flamethrower anaology is a bit more appropriately applied to the people who were itching for any excuse to invade Iran 10 years ago and are now itching for an excuse to invade Iran.

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Re: There is no doubt about it

Unemployment rate is now LESS than it was when Obama took office, so however many people lost their jobs, more than that number found new ones.

My own political leanings (about which I'll say no more here) aside, I must note your conclusion doesn't follow. The unemployment rate published by the US Bureau of Labor Statistics and/or the Census Bureau counts people who are actively seeking work - so the rate is discounted by job-seekers giving up looking for work. While that's the only sensible way to calculate it (you shouldn't count retirees, people who have left the workforce to be full-time parents, people who have returned to school full time, etc, against the employment rate), it does mean that you can't conclude that a drop in unemployment means more people have found jobs than have lost them.

That's why some people prefer to use alternative statistics (also from the BLS), such as U-6, which also includes the "marginally" employed and part-time employed. (Then, of course, there's the whole "seasonal adjustment" thing; let's just ignore that.) Annual U-6 climbed steadily 2006-2010, peaking at 16.7, then dropped a bit to 15.9 for 2011. Month-on-month it's been lower every month this year, versus 2011; it looks to come in a bit better than 2009 but significantly worse than 2008.

So, if you want a naive, grossly oversimplified summary: broadly measured, US unemployment got worse during the final months of the Bush administration, and even worse during the first half of the Obama administration, then started to get better, and is currently improving. But we're still not accounting for people who'd like to work but have given up (at least for the moment) on finding a job.

And in itself that says nothing about how much credit or blame can be laid at the feet of either president.

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WTF?

Oh no, not again

Just when I thought Asay was starting to write decent material we get this load of bollocks.

Newsflash people. No one is going to sell stock in November based on the election result. Reason ? The president might want to raise the tax rate but he doesn't get to make laws. Only Congress can do that and even if Obama wins and even if the Democrats win both houses there's no guarantee that they'll agree with him on this point.

If people sell in November it's because they want to and because the US tax year matches the calendar year. It'll have nothing to do with the election.

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Re: Oh no, not again

The president might want to raise the tax rate but he doesn't get to make laws. Only Congress can do that and even if Obama wins and even if the Democrats win both houses there's no guarantee that they'll agree with him on this point.

True. On the other hand, there's little evidence that the markets are dominated by rational actors. They could decide to start dumping stock because of who wins the election, or because the euro zone isn't dealing with its sovereign-credit crisis, or because the Thanksgiving turkey was too dry.

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