The letter below has been widely discussed this month throughout the financial world because it comes from legendary hedge fund manager David Einhorn. He believes we have entered a new tech bubble and he compares the new crop of technology darlings to those of the late 1990's. He notes:
There is a huge gap between the bubble price and the point where disciplined growth investors (let alone value investors) become interested buyers. When the last internet bubble popped, Cisco (the best of the best bubble stocks) fell 89%, Amazon fell 93%, and the lower quality stocks fell even more.
The letter has unleashed a torrent of responses across the financial media explaining why the new group of companies that do not produce profits will be different from those created during the last mania.
David is very used to being early and being ridiculed. He was a lone voice on the conference calls for a major bank back in early 2008 asking uncomfortable questions about their balance sheet. He took a large short position and received a steady stream of media ridicule and personal attacks from the bank in question. That bank was Lehman Brothers. You can listen to a great CNBC interview here, just a few months before the bankruptcy.
In his new letter below, the good stuff gets going in the last paragraph on page two. Click the bottom right square below to take the letter full screen: