Andreessen: The market hates tech but is starved for growth
With the tech IPO calendar filling up, it was good to see Marc Andreessen sit down for the Wall Street Journal’s weekly Big Interview. Andreessen was a founder of Netscape, the first big IPO of the dot.com bubble days. Now he sits on the board of Facebook, eBay, and HP. And his firm Andreessen Horowitz is an investor in many of the big name Web 2.0 companies like Facebook, LinkedIn, Groupon and Zynga.
Andreessen believes companies like Google and Apple are undervalued because "the market doesn’t like tech." In his view, the recent popularity of tech companies does not constitute a bubble. Instead, he sees a market that is starved for growth.
Video below
Apple is fairly priced right now, but the rest of the market and especially banks are grossly overvalued. Though he might be right about tech stocks generally being underrated. The problems is that low interest rates make even average companies returns look good.
Andreessen is much to close to the situation to be objective. It is interesting to hear his perspective because it represents the Silicon Valley/VC world view quite well. Market professionals in any niche are narrowly focused on the deals, the strategies that benefit themselves and really can’t be counted on to give an accurate macro view.
I think tech is back to where it was before the Internet hey day and that’s with a market multiple in line with the market. And so in a sense he is right that the premium for tech has vanished because people recognize that the chasing growth has caused them to be burned. But does that mean the market hates tech. No, it is back to it historical pre-Internet position in line with the market as a whole.
On the other hand, these IPO deals are clear indication that the risk-on trade is alive and well.
I agree about his lack of objectivity. That also applies to any sector.
As for the lack of an investment premium that is also very true but the premium should be a lot lower than markets price in. Apple with its solid growth can justify its PE of around 16 but the vast majority of US companies are probably grossly overvalued. As you say the risk on trade is alive and kicking, but I do think that a serious set back will cause another panic. I think that the Dow and S&P will fall significantly once the next crisis hits. I am thinking that it will be within months now. Markets look nervous. Stockholders will probably revolt over executive pay as they will show much of the returns have been completely illusory.
Greece is being offered a tough deal which means that default is likely. Ireland would do well to follow suit. Once the credit default swaps start to pay out watch losses in US and european banks who have been dealing in that sector. Then bank stocks will take a significant hit. This could cause another credit crisis as banks will have no idea who is at risk. Once the defaults start the big banks will collapse, unless bailed out again, and then the carry trade will evaporate as the risk-on trade returns a flight to safety with all that QE money returning to treasuries.
IPO deals are indicative of another bubble. Though tech stocks should have ratings that are realisitic. Low interest rates inflate the ratings without good reason.
Apple is fairly priced right now, but the rest of the market and especially banks are grossly overvalued. Though he might be right about tech stocks generally being underrated. The problems is that low interest rates make even average companies returns look good.
Andreessen is much to close to the situation to be objective. It is interesting to hear his perspective because it represents the Silicon Valley/VC world view quite well. Market professionals in any niche are narrowly focused on the deals, the strategies that benefit themselves and really can’t be counted on to give an accurate macro view.
I think tech is back to where it was before the Internet hey day and that’s with a market multiple in line with the market. And so in a sense he is right that the premium for tech has vanished because people recognize that the chasing growth has caused them to be burned. But does that mean the market hates tech. No, it is back to it historical pre-Internet position in line with the market as a whole.
On the other hand, these IPO deals are clear indication that the risk-on trade is alive and well.
I agree about his lack of objectivity. That also applies to any sector.
As for the lack of an investment premium that is also very true but the premium should be a lot lower than markets price in. Apple with its solid growth can justify its PE of around 16 but the vast majority of US companies are probably grossly overvalued. As you say the risk on trade is alive and kicking, but I do think that a serious set back will cause another panic. I think that the Dow and S&P will fall significantly once the next crisis hits. I am thinking that it will be within months now. Markets look nervous. Stockholders will probably revolt over executive pay as they will show much of the returns have been completely illusory.
Greece is being offered a tough deal which means that default is likely. Ireland would do well to follow suit. Once the credit default swaps start to pay out watch losses in US and european banks who have been dealing in that sector. Then bank stocks will take a significant hit. This could cause another credit crisis as banks will have no idea who is at risk. Once the defaults start the big banks will collapse, unless bailed out again, and then the carry trade will evaporate as the risk-on trade returns a flight to safety with all that QE money returning to treasuries.
IPO deals are indicative of another bubble. Though tech stocks should have ratings that are realisitic. Low interest rates inflate the ratings without good reason.