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Facebook Kills The Tech Bubble Dead: Tech Bubble Death Watch

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Look Out! You can say one good thing for the Facebook IPO: It has driven a dagger right into the heart of the tech bubble.

Facebook's initial public offering a couple of weeks ago, an event that rendered the word "hype" inadequate, once seemed likely to have the opposite effect. Had the IPO gone well -- had the stock risen 28 percent in two weeks, say, instead of falling 28 percent in two weeks, which it has done -- then the frustrated investors who missed out on the rally would be salivating for the next hot tech IPO. Wall Street would be stuffing those IPOs down our throats as quickly as it could. There would be more talk about a "new paradigm" that makes it OK for Facebook to be priced at 100 times earnings. Said paradigm would help those IPOs being stuffed down our throats go down more easily.

Instead, Facebook's stock was recently at a little more than $27, an embarrassing swoon from its IPO price of $38. Lawsuits and accusations are flying about who is to blame for the debacle -- the Nasdaq stock exchange that bungled the listing, or the banks who flooded the market with too much overpriced stock -- but one thing everybody can suddenly agree on is that Facebook was way, way overvalued. People already didn't trust Wall Street. Now they really don't trust Wall Street.

And the IPO market is kaput, dead, over, pushing up daisies, sleeping with fishes. Discount travel site Kayak delayed its IPO until after the winter of Facebook's discontent has passed, and the IPO calendar is a howling void.

And that means the tech bubble is back on ice for the time being, at least in the classic sense. There may still be overpricing going on in the private market, with venture capitalists paying way too much for stakes in monosyllabically named social-media app makers younger than most human infants. But for the moment the investing public seems remarkably rational about tech. Some even argue the investing public is irrationally pessimistic about tech, given Apple's low valuation, with its stock trading at just 14 times the past 12 months' earnings.

With all this in mind, we're taking our patented, Pulitzer-eligible Tech Bubble Death Watch meter all the way down to a "1," the lowest level of tech-bubble alert. Your money is safe for now from a dangerous tech bubble.

But it's still early days. If Facebook's stock starts to rally in the months ahead, CNET's Paul Sloan wrote last week, "a lot of fresh Facebook millionaires will cash out" and start pumping cash into "companies trying to become the next Facebook."

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