This Social Media CEO Blames the Fed for the Tech Bubble

May 27, 2015 Updated: May 27, 2015    

He’s only 24 years old and makes messaging apps. However, he has a unique insight into financial markets and is not afraid to speak about it. Aside from that, he is the world’s youngest billionaire.

Evan Spiegel, founder and CEO of messaging app Snapchat, again reiterated that “easy money policy” and money printing are responsible for the current lofty valuations of what people dub the second tech bubble (after the one in 1999).

“When governments print a lot of money, people are making riskier investments. There will be a correction,” he said at the Code Conference on May 26 in Rancho Palos Verdes, California. He obviously doesn’t mind that investors now value his company at $15 billion. He is already looking for a way to cash out:  

“We have to IPO,” he says, as he is convinced there will be a 20 to 30 percent correction in technology valuations sooner rather than later. “It’s definitely something we factor into our plans.”

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What makes him different from other people and companies riding the stock market is that he is not afraid to speak about it.

Since the stock market bottomed in 2009 (helped by the Federal Reserve’s quantitative easing program), the NASDAQ Composite Index, which provides a good gauge for the technology sector, is up almost 300 percent. Its price-earnings ratio stands at 25, close to the 30 it had in 1999.

For companies that haven’t gone public, the relationship between earnings and valuation is even more out of whack, if there are earnings to speak of in the first place. Snapchat itself only just began earning revenue with its Discover app.

Spiegel himself talked about this monetization problem in an email leaked to the public at the end of 2013.

“Total Internet advertising spend cannot justify outsized valuations of social media products that derive revenue from advertising. Feed-based advertising units will plummet in value (in the case of Twitter, advertising spend may not move beyond experimental dollars) similar to earlier devaluing of Internet display advertising,” he wrote.

This hasn’t stopped venture capital companies from continuing to pour money into companies with little revenue and no earnings.