The 101 Index

Highway 101 segment through the Bay Area becomes  over-crowded again. An hour commute often turns into more two hours. People call the level of traffic congestion the 101 Index. This often means the economy is booming.

On the other hand, San Francisco office rents is reported had risen to an average of $33.27 per square foot in the second quarter, up 6.4% from the previous year, according to real-estate research firm Reis Inc. That outpaced all other major U.S. metro areas, says Reis senior economist Ryan Severino. The city ranks third behind New York City and Washington, D.C., based on prices alone. Meanwhile, San Francisco office vacancy rates fell to 13.8% in the second quarter, from 14.8% during the year-ago quarter and 15.5% in the second quarter of 2010.

All good signs, isn't it? For some yes, for some no. The ones who would say may be social networking IPO investors. The Wall Street Journal reports that Facebook employees have lost millions of dollars on paper profit, same as their IPO investors. The tone is sympathetic, maybe because of the amount of fortune lost. However, readers argued that 90% startups would fail. Venture capitalists have to make up the failed 90% from the 10% that can go to IPOs. The 90% maybe dreams from some entrepreneurs or wealthy individuals and unrealistic. When they structure entities to achieve the goals, the onset is already risky. There is no sure bet.

Many further argue that old economy participants like doctors or workers work whole life to pay off houses, children education, etc, but the young workers at the social networking startups now talk about lost millions in a couple months on stocks. Is this fair? Tangible and intangible asset comparison has never been clear here. The most important factor is early investor return expectation. Because of low success ratio at venture capital investments, whenever there is some sort of return, they have to drive it very hard so that they can recycle capital. Overpriced IPO prices and over-issued shares are two apparent ways. There are always bigger fools to pay the bill.

Social networking companies aren't soon be out of tide. They may remain for a while. However, investing in these companies is a different story. The sell side is always on call for action.