RE: Be wary of the race to the tech stocks ...31 Jul 2020 13:01
From that heyday in the spring of 2000, prospects for the “dot-com industry” looked magnificent – until the bubble popped.
One signature event came on April 3, when a federal court declared Microsoft a monopoly. The aftershock sent NASDAQ tumbling all the way to 3,649 before bouncing back slightly to 4,223. NASDAQ, the home for most tech companies, quickly 10% in value; over the next year, losses would accelerate even further.
Over the next few years, vast numbers of dot-coms went under. AOL merged with Time Warner in what would later be viewed as a debacle, jump-starting the gradual and shocking decline of AOL from its position as the world’s leading internet service provider to a company that now just delivers online content with net income of a mere $13 million a year.
From March, 2000 to October, 2002, the stock market as a whole lost roughly $5 trillion in market value. This helped to spark a recession that lasted eight months and shrank GDP by 0.3%. Of course, some of this is attributable to the terrorist attacks on September 11, 2001, but the bursting of the tech bubble put an end to a decade of continual and rampant economic growth in the U.S.
Wall Street doesn’t always learn lessons, although since the last tech crash occurred, investors have seem to done a better job as a whole at paying attention to the financial strength of a company – especially its debt load versus its total assets, but because of present low interest rates and out of desperation in the search for some return on funds will the herd risk buying into more of the bubble fuelled hype again?
Could it be because of the Tech Crash of 2001, companies like Facebook (FB), Zynga (ZNGA), and Groupon (GRPN) are undergoing more intense scrutiny from investors, analysts, and institutions – which helps to explain how each of these companies have lost substantial market value since their IPOs.
So have lessons really been learned or might a tech bubble occur again, or has Wall Street has had its fill of tech stocks growing rapidly without any real rhyme or reason?
In the last dot com crash I well recall seeing seeing several companies goes bust almost overnight which reduced my portfolio value by over two thirds!
So I shall stick to Centamin!
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