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With scandals rocking the financial industry, this past month served as a reminder of why I love tech stocks.
Unlike Wall Street and its rent-seeking ways, Silicon Valley actually builds things. Maybe not roads and bridges, but still things of value. Our lives have been transformed by the “iPhone,” “Facebook,” and “Google,” which were brought to you by Apple Inc.(NASDAQ:AAPL), Facebook Inc (NASDAQ:FB), and Alphabet Inc (NASDAQ:GOOG).
Silicon Valley has put a supercomputer in almost everyone’s pocket, connected us across continents, and archived just about the entire store of human knowledge.
By contrast, Wall Street gives us almost nothing but scandal. Take the recent Wells Fargo & Co. (NYSE:WFC) fiasco, for example. Retail bank employees were opening new accounts and credit cards without customers knowing. They did it to meet quotas—which were much higher than comparable metrics at other banks—not least because they wanted to keep their jobs.
At the same time, Deutsche Bank AG was in serious trouble with U.S. regulators, having been hit with a monstrously huge $14.0 billion fine. But that wasn’t even the worst of the bank’s bad news. A closer examination of Deutsche Bank’s statements showed they had $47.0 trillion worth of derivative exposure. Just think about that for a second. The company is only worth $18.4 billion, meaning it is grossly over-leveraged!
Even outside the financial sector, the world is a scary place. Recent reports show that one quarter of all Chinese companies can’t afford to pay the interest on their debts. Most would go bankrupt, so the government is pressuring lenders to roll over the debt. That’s what’s keeping China’s stock market bubble inflated right now, but it can only last for so long. So both American finance and Chinese growth aren’t enough to propel us forward for the next decade. What can take their place?
In a nutshell: tech stocks.
With all those scary things going on, it’s tempting to keep your money tucked under a mattress. But remember that Silicon Valley is pushing the world forward through innovation and technology. It is building real prosperity. What I love about tech stocks is that they generate actual value as opposed to many other firms out there in the world.
I see the future in companies that build data centers, advanced microchips, and artificially intelligent (AI) software. These technology companies are finding the last pockets of growth because they push beyond the boundaries of what exists today. That’s what makes them special; they invent what will exist tomorrow.