Theory: Wallstreet has limited other domestic outlets for their investment money since the 2008 crash, and is therefore investing heavily in tech. This will continue until either 1) more sectors of the economy recover present new and/or better investment opportunities or 2) a crash occurs. However, in the case of #2, which everyone fears, unless the conditions change and wall street gets a new location to place their money, tech will still be one of the best domestic investment opportunities, and we'll see a new climb in spending after said crash.
That's my 2 cent theory, I'd love to hear some discussion on it.
My theory is similar. We are in a "rise-all-boats" bull run thanks to the injection of cash into the economy from the Fed. The few "Buffet-like" value investment managers are saying there isn't much margin-of-safety in valuations any more. Also, other than tech, other sectors of the economy are "easy" to price. We pretty much know the growth of a utility company, real estate company, etc is going to be. They can only grow so fast, and the market guess within certain tolerances what it will be.
On the other hand, tech is one of those fairy land sectors that is not priced on any reasonable metric (profits), but instead on hopes and dreams. Until all tech becomes priced based on profits (like Apple, IBM, Google, etc) it will continue to see large investments seeking outlandish returns. Right now it's an area where getting market share from others can happen quickly.
It's pretty hard to grab market share from a utility (usually regulated monopoly) or a rent seeker (you need to buy the asset to rent it out yourself). Same goes for other sectors, only so many cars can be bought every year for example.
Snagging eyeballs can happen quickly, can be fleeting (myspace) or more long-lasting (facebook). Hence the WhatsApp stuff (OMG, so many eyeballs there, just like facebook!!!).
That's pretty much it, isn't it? They pick something to start throwing money at until it explodes and destroys half the economy, and then they move onto the next thing. They're still doing real-estate here in Canada.
When will we see a "Western heavy industry" bubble?
The western heavy industry bubble happened in the 1840s. And before, and after. A financial bubble looks a lot like the "hype cycle" for new tech - it's hyped up somewhere beyond its actual value, then crashes to below its "true" value, then recovers and becomes something actually useful. It happens to every new industry, or when circumstances change.
There are signs the financial industry is running out of targets though (equities trading was pretty much commoditized decades ago, corporate bonds happened in the '80s, we've just seen the boom and bust for sovereign bonds and asset-backed securities. There's a little bit of interesting stuff going on in commodities and forex, but by and large all this money is sloshing around with nowhere to really go for returns), and the industry itself is shrinking. If anything we may have seen a finance bubble too.
Both will happen. A sudden withdrawal of cash from tech will manifest with developing companies (a lot of them) not making payroll, a sudden rout of closures, causing more money to flee tech because it now looks like it's crashing etc...
The question here is over what timescale would you expect to see the new climb? Isn't what you're really describing is just boom and bust which is pretty much business as usual, but you seem to be implying that it might just recover faster.
But if that's true (I can sort of see the logic - essentially that Wall St won't learn it's lesson for which there is some evidence) doesn't it also follow that the next bust would just come faster? If the crash is really just what happens when the valuations defy reality then if the money comes rushing back faster, wouldn't that just come about again faster?
That's my 2 cent theory, I'd love to hear some discussion on it.