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Comment by hooande | Hacker News Reader

The third point explains the first two. Something has to be done with the billions of dollars fleeing real estate and the general stock market. You get billion dollar valuations when people are saying "I have a billion dollars and I really need a place to invest it"

The startup community needs to get over the idea that "valuations" are based in reality. Rich people need ways to get richer. They could choose tech startups, they could choose real estate, they could choose tulips... it doesn't matter as long as they can make up money and push it back and forth between one another.

But alas, it feels much better to say "My company was valued at a billion dollars!" than it does to say "Rich people used my company as tool to transfer money to each other!" If we would just stop taking the numbers seriously then we could stop the debate about whether or not we're in a bubble.

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Yes, but the rich only get rich on a bubble if they know it is a bubble and get out soon enough. So we are to assume that the rich are getting the tech train moving, letting the Hoi polloi add some rule coal to the fire, then hopping off before the thing crashes off a cliff?

That is possible, but every part of my forced analogy is necessary for the idea to hold water.

I think the term you're looking for is Ponzi scheme. Much like Bernie Made-off... err Madoff operated. Or perhaps more recently: Groupon. A classic pump and dump, take a look at the charts.

Your 'train analogy' is merely painting a glib picture of what is clearly insider trading by the likes of Goldman Sachs in a different, albeit obvious, guise.

You are conflating completely different kinds of stock scams.

Perhaps in detail, but they both constitute classic Ponzi schemes. Convoluted valuation(s)/promise of returns only to find yourself trapped with a worthless 'investment' when the core of the operating capital has been pilfered by its biggest players.

Goldman Sachs is the underwriter (and reason enough to scoff its initial valuation and then spike in price) of the IPO in question, hence the pump and dump; JP Morgan was taking a billion in fees for services rendered while Madoff laundered his money there.

I love how people jump on the anti-GS train because it's the hip, popular thing to do. No doubt, GS has done things wrong. But:

  1) They were not the SOLE underwriter of GroupOn, nor were they the largest (that was Morgan Stanley).
  2) They were co-leads with Morgan and Credit Suisse.
  3) They made $8mm in fees on the deal.

To put it into perspective, GS's Q1 2012 revenue was $9.95bn. Let's compare for perspective:

  9,950,000,000
  8,000,000

Obviously GS also profited from the fact that they could buy GroupOn on the cheap, at pre-IPO prices, but even then I hardly think it would have made a dent in their bottom line.

So if you're going to criticize, add Morgan and Credit Suisse to your list. And JPMC wasn't even a lead underwriter on GroupOn. And even then, if you're going to implicate people, you might as well add the other 11 underwriters.

And in fact, you might as well add GroupOn's early investors who standed to make a KILLING on the inflated IPO price.

It's dollars all the way down, sir - and it doesn't start or stop just at Goldman Sachs.

I don't know that all the rich are smart enough to do it that way, but you can bet a lot of them are.

Your "forced analogy" is quite familiar to any experienced stock trader. Getting in and out at the right time is critical.

Grammar trivia : "the Hoi polloi" contains redundancy, since "Hoi" duplicates the "the".

Grammar trivia: "children" contains redundancy, a doubled plural. The germanic plural of "child" is "childer", and that didn't sound plural enough, so they added the -en that pluralized such fine words as ox -> oxen, and child-er-en then sounded correct.

It kinda makes the asteroid mining venture from yesterday seem a lot more sensible and tangible an investment long term.

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