The Silicon Valley Top

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Late last year, I paid a visit to Josh Brown ("The Reformed Broker") and had a pleasant chat. I went to his blog a week later and put up a comment, shown below, stating my belief that Facebook's IPO day would mark an important turning point in the market.

I forgot all about this, but totally by chance, a few days ago, I re-visited that comment and I saw that someone had put in a snide reply.

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Errr, actually, Facebook only goes public one time, so I'm not sure how I could make such a declaration "a lot". It's a specific day, and I do believe that Facebook's IPO will be a seminal event. There's only one Facebook, and it has only one IPO. It's not like there are twenty other Facebook-equivalents waiting behind it, and because of the public's fascination with this offering, I do believe it'll mark a tipping point.

It got me to thinking, though, about how many data points there are pointing to a general top in everything related to the Silicon Valley. I know this Valley and its culture intimately, and I live right in the heart of it. I could throw a rock and hit Zuckerberg's house from my back yard, and I drive past the homes of tech billionaires on almost a daily basis. This isn't 1999 all over again – - – a lot of things have changed since then, so the texture of this bubble is different – - but it's a bubble (both cultural and financial) nonetheless.

I offer the following anecdotal tidbits:

First, Bravo (home of the "Housewives" franchise, about which I wrote this oh-so-cool post) is going to launch a reality show about the Silicon Valley. This reminds of of how Richistan was published at almost precisely the top of the financial bubble (practically to the minute). 

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Next up is the billion (yes, billion, with a B) dollar acquisition of startup Instagram by Facebook earlier this week. Remember how people used to joke at the huge valuations companies were getting in 1999, even though the target companies had no profits? Well, Instagram is different. It doesn't even have revenue. That's right – - the P/E and P/S ratios both yield errors on any calculator you dare try. (I guess this is the kind of insane exit Color.com's investors were hoping for…..the amazing thing is that just a few days before this billion-dollar acquisition, Instagram got a fresh round of VC funding at what was considered the lunatic valuation of half that amount).

 

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And, of course, there's Apple. The media is saturated with breathless reports about how Apple may be the world's first-ever trillion-dollar market cap company.

Of course, this isn't the first time we've heard this about any particular firm (cough, Petrochina, cough, Cisco, cough), and these musings typically happen, oh, just about the time that the firm in question starts to head south.

I have no idea what on Earth could slow down the Apple juggernaut, but for AAPL to simply stomp ahead and tag a trillion dollars in value now that these predictions have been wholly embraced would be, shall we say, atypical.

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Whether or not the NASDAQ has new highs ahead of it remains to be seen. All I can say is that, considering the extraordinarily deep and pervasive saturation of all-things-Silicon-Valley in the world at large, it just seems to me that a major contrarian event is at hand.

Dennis Kneale top, anybody?

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