Carl Icahn says we’re in a bubble. Larry Summers says we’re not. Financial media have debated the topic in recent weeks, and both sides have offered some seemingly irrefutable points. Low interest rates would tend to drive up asset prices; however, high unemployment would tend to hold them back. Stocks aren’t historically overvalued, but then again the economy is historically weak. Corporate leverage is now at 2008 levels, and the picture is even worse overseas
, but cash holdings are at record highs.
It’s quiet – but is it too quiet?
Personally, I haven’t paid much attention to the discussion. When Lady Gaga calls a press conference in Brooklyn to introduce an environmentally-friendly, flying dress
– and the press actually shows up – it seems pretty clear to me that we’re in a bubble.
And when she uses the terms “visionary, artistic, entrepreneurial, poetic, social, techie” to describe her new mobile app, I don’t see how there can be any doubt that we’ve reached the End Times.
Lady Gaga might not be the sort of financial metric used by serious economists like Mr. Summers, but she’s not a bad foil for the modern economy – or at least the tech sector. After all, when Samsung
(OTCMKTS:SSNLF) debuted the Galaxy S4, it did so with a song and dance routine. Qualcomm’s
(NASDAQ:QCOM) CES keynote was a tribute to the theater of the absurd
, featuring Big Bird and Desmond Tutu. At this very moment, Google
(NASDAQ:GOOG) is busy turning barges into “unprecedented artistic structures.”
And surely I’m not the only one to have noticed a similarity between Lady Gaga’s brand of serial scandal, and the TechCrunch Disrupt conferences now being held at regular intervals, and with no apparent sense of irony. Or the fact that her debut album, "The Fame," topped the charts as the market made its turn in early 2009. But I digress.
If a bubble is an unsustainable climb in asset prices, then I have no idea whether or not we’re in one. I do worry about the action in technology companies. The melt-up in 2013 has coincided with some of the lowest volume in many years; market leaders like Google and Amazon
(NASDAQ:AMZN) tell the tale. Over the last 24 months, we’ve seen buyer interest rotate out of high-performing, high-margin companies like Apple
(NASDAQ:AAPL), Samsung, and Rackspace
(NYSE:RAX), and into high-performing, less-profitable ones like Salesforce.com
(NASDAQ:TSLA), and Stratasys
(NASDAQ:SSYS). Losses are waved away by corporate management with the same Gaga-esque refrain we’ve been hearing for years: visionary, artistic, entrepreneurial, poetic, social, techie. And while these may be troubling signs, they’re not proof of anything.
If, however, a bubble is a period of time in which people talk big and act stupid, then 2013 was a year for the books. It was the year in which Ray Kurzweil might have cured cancer
, had he gotten around to it; the year in which Elon Musk might have reinvented public transportation, had he gotten around to it. It was the year of promises. Facebook
(NASDAQ:FB) promised immigration reform. Google promised a cure for death. Samsung promised “the next big thing.” Young men and women, sitting in brightly colored beanbag chairs
, promised to “promote freedom at all costs.”
What we got, though, was Edward Snowden and Healthcare.gov, not to mention a long list of disappointments. Windows 8 whiffed, and wearable tech was a bust. The Galaxy 4S turned on Samsung, and the iPhone 5s resulted in eulogies for the death of innovation. Mobile commoditized and lost its luster, the Cloud was overshadowed
by nationalism abroad, and the field of statistics sank further into existential crisis
while Big Data jogged victory laps. It was the year of buyer’s remorse, as San Francisco had second thoughts
about this whole tech thing, and New Yorkers chose rent-controls
We got Google Glass and we got controversy; we got quantified self and we got ads. This was the first year of the boom in which consumers were confronted with the price of their tech binge. It was also, by strange coincidence, the first year of the boom in which borrowers were asked to pay something close to normal interest rates – and the question for 2014 is whether they’ll keep paying it, and continue buying all of the promises. My purely speculative guess, based on a personal dislike for Lady Gaga’s music, is that they won’t.
Which is to say that I don’t know what will happen any better than Larry Summers does. Economic formulae might tell us something about the economy, and the fortunes of a pop star may tell us something about social mood, but I’m not going to bet the farm on either one (although I will just point out that "Artpop" isn’t selling all that well
). Ultimately, we have to judge the economy in the same way we judge music: by listening to it. For what it’s worth – and I don’t expect it to be much – I hear something discordant.