A "bubble" in growth

The market has experienced a massive run over the past year and a half. Much of that is due to the economic/political clouds clearing, confidence repairing, earnings coming through and ZIRP (and all its manifestations, eg. Bernanke Put, etc.) supporting a one-way trade.

But there is no doubt in my mind we are experiencing a growth bubble not too dissimilar to the internet bubble (which granted was a great deal more diffuse) in a number of places. These companies are characterized by rapid revenue growth, low to no profit, and the prospect/hope of future leveraged profitability - sound familiar. What is scary to me is that like the internet bubble it kept going and going until finally you threw in the towel and drank the kool-aid yourself. There are no signs of multiple expansion declining. No signs of a prick.

We will wake-up one day, two weeks, three weeks, four weeks past the peak and realize the game is up. For me that will mean watching the aftermath. I am hopeless at chasing. I will likely have been burned badly fighting it on the way up only to have capitulated and failed to have a position (or worse had a position but failed to have the conviction/patience to let the position ride) to capitalize on the bursting.

There will no doubt come a time when the market will once again focus on long term sustainable profitability with a degree of scepticism toward these sectors (which will likely result in overshoot on the downside). The scales will fall and the reckoning will begin.

Main areas where a bubble burst in valuation will be felt: SaaS, big data, analytics, cloud, biotech, social media.

Philosophy - Dialectical Materialism

Dialectical Materialism- Communism

dialectical materialism: refers particularly the social philosophy known as Communism, synthesis of Here’s dialectic and Feuerbach’s materialistic doctrines.

Ricardo’s labour theory of value became the fundamental thesis of Marx’s Das Kapital.

Karl Marx (1818-1883) - wrote the Manifesto of the Communist Party (1848) with Friedrich Engels (1820-1895), participated in the revolution of 1848.

- communism as the ownership of the means of production, abolition of private property, labour theory of value (“surplus value”); inevitability of profiteering and exploitation of labour, scientific socialism, violent revolution, class struggle, dictatorship of the proleteriat, achievement of a classless society, religion as opium of the masses

- Marx applied Hegel’s dialectic to socio-economic history  ie. bourgeoisie  (thesis), proleteriat (antithesis) leading to classless society (synthesis).

- His economic interpretation of history is known as historical materialism, is based upon the doctrine of economic determinism.

- a particular society’s mode of economic production determines the nature of its culture and social structure (Feuerbach had applied this materialistic concept to social problems and cultural evolution).

- owing to the dialectical nature of history [stages: slavery-->feudalism-->capitalism-->socialism-->communism) each historical period carries within itself the “germ of its own destruction”

- the mode of production of material goods determines the political, social, intellectual and religious life and institutions of a given people in each era of history.

“it is not the consciousness of men that determines their being, but, on the contrary their social being that determines their consciousness.

communism - an ideal system to be achieved by shifting control over economic resources from the capitalists to the proleteriat.

- since the labour of many workers is required to support a single capitalist, members of the capitalist class are parasites living at the expense of the exploited workers.

Labour theory of value - price of a product is determined by the amount of labour expended on its production.

capital = accumulated surplus value; surplus value = the difference between the actual cost of manufacture and its selling price (net profit) or the unjust process of profiteering by using money to earn money instead of working for such earnings.

profit = exploitation of labour.

- the capitalist is unnecessary but the worker is indispensible for production.

- the worker sells himself at a subsistence wage instead of the proper reward which should include the surplus value.

- as a result an inherent class war between the proleteriat and the capitalist exists which can only be resolved through the overthrow of the capitalist by violent revolution when “all of the workers of the world unite”

-communist motto “from each according to his abilities, to each according to his needs”

- all events in human consciousness are physical reactions aimed at satisfying the economic and material needs of mankind.

- morality is contingent upon the social class, and the social class along with its moral code is in turn the product of the mode of production.

“human essence has no true reality”   “matter thinks”

- industrial and scientific work constitutes the highest form of activity, the goal of which is the production of material goods for the enhancement of human well-being

- religion is an illusion, with the illusory happiness based on it needing to be condemned.  Religion functions as a bourgeoisie police force, a technique to dissuade the masses from revolting by promising them a better, happier life after death.

Vladmir Ilich Ulyanov (1870-1924) - aka Nikolai Lenin, disciple of Marx, exiled to Siberia, formed Bolshevik party in London, a staunch defender of metaphysical materialism, his was a philosophy of history.

- revolution was the leap from one stage to the next.

Mao Tse-Tung (1893-1976) - placed great emphasis upon  (1) practice (the pragmatic element of communism) and  (2) contradiction (conflict and revolution).

- without conflict, there can be no progress   “All political power grows out of the barrel of a gun”

- the only valid criterion of truth is man’s social practice (condemned philosophers for  speculating, whereas the task of man is to change the world).

- contradictions among communists may be democratically resolved (“unity==>criticism==>unity”)