I caught the swine flu which has taken me out of commission. I feel a little like Rip Van Winkle after a long rest. Waking up to see a flurry of M&A activity as well as large financings. In the last couple of days we had EA buy Playfish for $400M, Google buying AdMob for $750M, HP acquiring 3com for $2.7B, and just recently social gaming provider Playdom raised $43M in venture financing. Is this the sign of an early tech rally?
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New Tech Rally?
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I think it's a sign of a huge bubble -- the entire stock market is inflated at the moment. Just look at amazon.com multiples -- it's P/E ratio is around 75.
There is a tremendous asset bubble fueled by "carry trade" -- i.e. because Fed's interest rate is so low, traders are borrowing money and invest in the stock market. The rising stock price gives companies opportunities to make acquisition.
Given the weak economic fundamentals, things will come back to earth.
Posted by: William | November 12, 2009 at 02:34 PM