The Price of Growth
Published in Les Échos
(France) on 3 March 2015
by Francois Vidal (link to original)
(France) on 3 March 2015
by Francois Vidal (link to original)
Translated from
by Nathanael Milien.
Edited by Nicholas Eckart.
No, the return of the NASDAQ to its Himalayan peak of 2000 is not the symbol of a new bubble of tech stocks. It's very tempting to see in this return to astronomical levels proof that investors have once again lost their minds. That would be a mistake. For in 15 years everything, or almost everything, has changed.
At the time, stock markets were living the dream of a new economy that was on the verge of challenging all the fundamentals. This vision justified paying tens of times the sales revenue to come from the first start-up being pitched. With the success that we know ... Today, this dream has become a reality. The digital revolution does not spare any sector and gives its lightweights unrivaled growth potential. And not only for Apple, Google or Facebook. In 2015, the profits of groups listed in the NASDAQ are expected to grow at a rate of 18 percent! In a world without growth, this dynamism is worth gold. Hence the current enthusiasm of investors for their stocks. Provided that their investment accounts also no longer have anything to do with those of the start-ups from 2000. The damaged pocketbooks of AOL and other WorldCom organizations of the era were followed by mountains of cash from Apple, Cisco or Microsoft.
Under these circumstances, there's nothing unreasonable about buying shares in the NASDAQ. On the contrary, even. Is it really riskier today to bet on Facebook instead of Caterpillar? We can doubt that. In fact, the surge of the tech stocks is a double symbol. Obviously, a symbol of the digital revolution underway. But also a symbol of a country, the United States, whose economy preserves its transformation potential. An example for us to reflect on, when the CAC 40 only counts four purely tech stocks.
At the time, stock markets were living the dream of a new economy that was on the verge of challenging all the fundamentals. This vision justified paying tens of times the sales revenue to come from the first start-up being pitched. With the success that we know ... Today, this dream has become a reality. The digital revolution does not spare any sector and gives its lightweights unrivaled growth potential. And not only for Apple, Google or Facebook. In 2015, the profits of groups listed in the NASDAQ are expected to grow at a rate of 18 percent! In a world without growth, this dynamism is worth gold. Hence the current enthusiasm of investors for their stocks. Provided that their investment accounts also no longer have anything to do with those of the start-ups from 2000. The damaged pocketbooks of AOL and other WorldCom organizations of the era were followed by mountains of cash from Apple, Cisco or Microsoft.
Under these circumstances, there's nothing unreasonable about buying shares in the NASDAQ. On the contrary, even. Is it really riskier today to bet on Facebook instead of Caterpillar? We can doubt that. In fact, the surge of the tech stocks is a double symbol. Obviously, a symbol of the digital revolution underway. But also a symbol of a country, the United States, whose economy preserves its transformation potential. An example for us to reflect on, when the CAC 40 only counts four purely tech stocks.
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