Friday, December 23, 2011

Bernanke Money Printing Benefits Tech Sector

I have pointed out earlier this year, one of the sectors getting its hands first on new Ben Bernanke printed money is the tech sector.

A new comment by John Shinal at Market Watch indicates this trend has continued through out the year and will likely continue into the new year:
It’s worth noting, because what Oracle is experiencing, and will continue to experience in 2012, also will impact every other U.S. tech company next year.

In short, salary costs per worker are headed higher, both for engineers and for sales staff with technical experience. Job opportunities abound for these prospects because their skills are in strong demand, as information technology becomes an ever-more important part of strategic planning for corporations.

For tech workers who are tired of their jobs, now is the best time in years to look for a new one that pays more. Fresh data and reporting provide evidence that the booming job market in technology is gathering more steam.

“Tech is one area that’s growing and thriving across the board,” said Adriana Ganos, a principal in the software-engineering practice in the Boston office of recruiting firm Winter, Wyman. “There are opportunities for everyone right now.”

For the last six years, Ganos has been helping put together software-development teams for start-ups and for “small organizations within large [tech] enterprises,” which she declined to identify.

She described the current state of her business as “very healthy … extremely healthy,” and added that West Coast companies are now coming to Boston in search of engineering talent.
What's going on here is that newly printed money tends to find its way to the capital goods sector, which includes the stock market and especially the IPO market.

The IPO market has been a huge funding source for the tech sector. In 2011, companies raised $36.3 billion from 125 IPOs. A good chunk of that ended up in tech. Groupon, LinkedIn, Jive Software, Zillow, Pandora Media and Zynga all went public this year. Zygna, alone, raised a billion dollars. That's a huge pot from which to bid for engineers.

As Bernanke money printing continues to hit the economy, the tech sector along with oil workers are likely to be major beneficiaries, ahead of the price inflationary curve.



  1. Very convenient to ignore the facts:

    Oracle earnings this week -- and the comments re the industry generally -- does NOT indicate things are rosy in tech land.

  2. @Anonymous

    Yeah, you are right, companies are bidding up tech salaries just for the hell of it.

  3. more, from anonymous #1 above:

    NASDAQ / QQQ/ NQ, has considerably underperformed both S&P 500 & esp DOW stocks this year, & esp the past 3 & 6 months.

  4. As someone who works in the tech sector, I can vouch that the above is true. The company that I work for is a small startup, financed entirely by private savings, so we're not on the receiving end of Bernanke money.

    However, we deal with programmers & designers all the time...and money is no object to many of them. Reminds me of when I worked for Merrill in the late 90's...Stockbrokers were rolling in it.

    That ended in a will this.

    I'm looking forward to this bust, in a sense, so that we can deal with programmers who are hungry and don't take their clients for granted.

  5. Nice analysis, thanks! The mini-recession this year can be attributed to the squeezing of profits in tech, as the ABCT predicts. Profits peaked in April as monetary pumping drove up the prices of inputs, such as wages in tech.

    Higher labor costs killed profits in tech and the stock markets tanked. Since Nasdaq is mostly tech and capital goods industries it should do worse than markets heavy with consumer goods makers and retailers.

    Higher costs for labor means that tech companies must borrow more to pay those higher wages if they want to keep operating or complete projects they have started.

  6. It's difficult and frustrating to compare the EJP economic outlook with those of other, lets say, "pessimistic" Austrians and others such as Richard Russell.
    I kind of get it a bit more after reading some of the comments here, but still...

    The one thing all Austrians seem to have in common is, big inflation is on the way.

    How long do you suppose this manipulated boom will last?
    Rising wages will kill it? Or is it Only when the money printing stops?

    The rising wages explains rising rents,... I'm just glad rent is capped by wages, unlike with home prices.

    Some days I feel like I know some things, lately I feel like I just don't get it. Arg.

  7. I am a software engineer, and I agree the tech sector is hot right now. I receive at least one call (sometimes 2 or 3) from variuos recruiters every week, offering wage increases of 15-20%. There has been a lot of turnover at my company, perhaps I'll be the next one to take some money from the Bernank.

  8. Sorry, that should have read, EPJ above, my bad.