Slashdot Mirror
Tech Stocks Rollercoaster - How Was Your Ride?
"Those graphs directly reflect my own experiences over the last 12 months. A year ago, I became CTO of a dot-com startup with seed funding and started a roller-coaster ride that peaked in February and March, when we were talking to VCs about how many millions they would invest. But April saw investor interest in dot-coms evaporate, and we shut down the company in July, returning the remaining seed funding to the original investors, rather than burn their money waiting for first-round investment from VCs who had recoiled from their former darlings - the dot-com entrepreneurs.
Despite failing to become a dot-com millionaire, I'm not hugely disappointed. Being part of the management team of a start-up is a truly unique experience and I would do it all over again for that reason alone. It sure beats being a wage slave. Fortunately, having been CTO of a dot-com has also had a positive effect on my career and, at the end of the roller-coaster ride, I can say that I have no regrets.
What sort of experiences did other Slashdot readers have over the past year? I know that there are probably one or two paper millionaires reading this right now, and I'm sure that their stories are very interesting, but what about the rest of you?"
Well, when the whole market tanked and NASDAQ was down 30+ percent, I was only down 1 percent from last year end, and that with disbursements too.
The main thing is not to panic, to buy for the long term, to not invest in anything you don't understand, and to be patient.
Remember, the AVERAGE growth is 8 to 10 percent. This can mean up years of 20 percent and down years of 10 percent.
While I ignore the age rule (percent of stocks is 100 minus age, rest is bonds minus 10 percent for cash), just like my grandparents did, and am thus always way more into stocks, I try to buy good long-term stocks for the most part. But I will sell if people get too excited (Transmeta, Red Hat) and buy back in when they get depressed (Red Hat, Microsoft).
The main factors in becoming millionaires for most people are:
1. being married to someone who is a saver;
2. saving/investing 10 percent or more of your income; and
3. living below your means.
I could live in a fancy neighborhood, buy a new car every year, but why? I'd rather live in a reasonable neighborhood where I don't have to keep up with the Gateses, buy a new car when my old one needs to be replaced (every 5 or 6 years, almost time), and save 20 percent of my income while giving tons to charity and political causes and having fun at parties.
Conspicuous consumption - the American nightmare. I ride the bus to work like most millionaires.
--- Will in Seattle - What are you doing to fight the War?
The difficulty in evaluating whether the 'bubble' has finally deflated has to do with the difficulty in distinguishing between the correlated forces giving rise to the bubble.
One of the forces is the promise of the Internet revolution. But another that is often overlooked and is just as, if not more, important is the fact that there has been a huge increase in the stock market participation of the 'average joe.' This is most apparent in the growth of mutual funds during the past 10 years.
In some sense this latter force is really a simple lesson in supply and demand. The demand in stock market investment goods went up while the supply (the stocks themselves) stayed fairly constant. Even when IPOs and new issues arrived, the resulting increase in supply was small compared to the daily growth in demand ... with a 'newbie' investor opening up a $2k IRA Account every few minutes.
So the question now is how much of the semingly high price paid for 'tech stocks' is due to an optimistic view of the impact of the Internet and how much due to simple supply and demand dynamics. If it's mainly the former, then the market still has a way to go before it's deflated, with every sign that the major 'reality check' is still in the works ... sort of like earthquakes in California, we've had a few large ones but the 'Big One'is still in the making.
But if the high stock prices are mainly due to the more straight-forward reason of supply and demand, then it looks like the market may have sufficiently deflated. The increase in demand (measured by the arrival of new, private investors) has significantly slowed down and there doesn't appear to be anymore 'hidden' sources of capital waiting to spring out and be fed into the stock market.
Lastly it should be noted that both of these forces reinforce each other. Optimism in the Internet is a major factor that motivated a lot of first-time investors to take money out of their banks and into NASDAQ. Similarly, greater funds in the market compared to places to put the funds contributed to the high tech prices, leading to even higher levels of Internet optimism.
Of course, the reverse is possible as well, with Internet pessimism dissuading the arrival of new funds and the lack of new funds creating more Internet doubt ... both of which would have disasterous effects on stock prices ...
These folks were sucked in bu the idea of easy trading and the media's coverage of the "new economy". These inexperienced traders often buy stocks and sell them in the same day. They're in it for the short and fast ride. They also tend to be more reactionary to news and even rumors.
However, since they are making up an ever-increasing portion of traders, they are having a greater impact. Other traders cannot ignore them -- they must concede at least partially to them since they have a real impact.
I believe this influx of fledging traders can explain the more-wild-than-usual ride in this new market. Heck, I'd be one of these people too if I weren't too lazy to watch my stocks 24x7.
I've learned, somewhat painfully, the following lesson:
.18 (ouch), Blue Mountain Brewing (a local craft brewer that I enjoyed) bought at $1 currently trading at a split adjusted .04. I pick some good ones and even have had some good timing but on the measure, I don't outperform my funds. The dogs drag down the good ones.
Despite my personal knowledge of technology and the computer industry, I have not been able to pick stocks that outperform my mutual funds.
There, I said it. Over the past few years, even including the recent bloodbath in internet stocks, no matter how well I think I know the industry I seem to guess wrong. Please no flames on the examples but I'll list a few: Compuware, bought at 40 currently under 10. A small company called Egan systems, bought at 2 3/8 sold at
Rules of logic don't usually apply to the market. Professional money managers (big firms and mutual funds) have access to information that most people simply can't get even with the information explosion of the Internet. I've systematically moved my money back to stock mutual funds and sleep better at night.
Don't confuse good technology with a compelling business model that will make money.
I ended up fine in the tech stock ride, not rich, didn't loose my pants either. I was diversified and did a bit better than the average.
What I have to say about the ride is that the crazy prices that some of the stocks were fetching really helped out the industry when there was a lot of money needed. A lot of startup companies got a chance to make it big. Now there has been some natural tech selection and things have calmed down. Some good companies came out stable, and the price of tech stocks is many multiples the value of the company. The people who paid $200+ for amazon were fools and got burned but that's the marked.
As x approaches total apathy I couldn't care less.
I saw no significant effect, from the standpoint of running my company. We are privately owned, and as such our stock is private. Many times I have been glad that my company is not on the rollercoaster of the stock market and it is a great relief to generally not have to work about the perceived health of the technology industry. The only real effect it may have relates to the amount of spending money that potential clients have, but most of our accounts are corporate so that doesn't really affect me greatly.
-- Solaris Central - http://w
Before the 1999 hoopla a person with my education would normally drive garbage trucks. Thanks to the brief upswing companies were willing to take chances like they never did before. Unfortunately with no stock options to live off of, breaking even has become a matter of borrowing money every month, so guess you can't defeat the education barrier.
If you are worried about the US market, there are
whole-world, and non-US index funds too.
> Slot machines (ideally) are random. Regardless
> of how badly or losing or winning you are,
>
> the chances of you winning or losing again are
> >equal.
You make it sound like the slot machines are 50/50
win/lose. Actually, they are wheeled to pay out something like 86 cents to the dollar. Yes they
are random, but they are randomized on a weighted curve, like all casino games.
-fb Everything not expressly forbidden is now mandatory.
Disclaimer: I know almost nothing about the stock market or economics other than what I have observed. I am generally clueless when it comes to these things.
.0001% of the company, then you get $500 that year. The company is not taxed on the money that goes to its shareholders, but its shareholders are. Whatever the company is left with can be used for operating expenses, salaries, R & D, etc.
Now, I generally don't invest in the stock market. The reason is that the value of a stock is not determined by perceived value. While it is true (in my limited knowledge) that stockholders have some chance of getting the assets of a company that has gone bankrupt, it can be safely be said that the owner of a stock owns little more than the paper that the certificate is written on.
The value of that piece of paper goes up and down with public perception of the company. The actual assets of the company may have some effect on this perception, but it is always the case that in buying and selling the stock, the price is ultimitely determined by the general perception of the stock.
I personally don't like the idea of my money being tied up in something whose values go up and down based upon public perception, because, well, frankly, most people are idiots.
Here is how I think that stock markets should work:
When you buy stock, you own a percentage of the company. Typically, this would be only a fraction of a fraction of a percent. You therefore get that exact percentage of the company's gross revenue each year. If the company makes 500 million dollars, and you own
This is basically forced dividends. It follows the principle that if you own a percentage of a company, then you get that percentage of the take.
There are a couple of upshots to this:
1) Companies would never want to sell more than a fixed, and probably small (25%), percentage of themselves to the public, because otherwise there would not be enough money left over for the company to pay for its operating costs.
2) The amount of money you initially pay for your share of the company is determined by market economics. You could sell your share in the company if you wanted to, and might make a profit or lose money in the transaction. But the value of the stock would be much more closely tied to the actual value of the company as a money-making entity and much less to arbitrary perception.
3) I believe that the market would then become a much more effective means of promoting economic growth, as the value of a company's stock, and therefore the distribution of investment money to companies, would, I believe, be much more closely tied to the actual value of the company as a money making entity, which itself is an indication of its value to the economy.
Anyway, that's how I think the market should work. I would invest alot more money in a company if I knew that the return would be based on its actual performance, and not on (typically off-base) perception public perception.
Which makes me wonder if the market shrinkage is mostly affecting those with "soft" skills, i.e., marketing, project management, etc., etc.
Do domain names matter?
That depends on how you look at it. Five years ago, which is the timeframe this article uses, there was one listed Internet company - AOL. It had a market cap of $1bn. Today Internet companies have a combined market cap of $1 trillion. So you're telling me an industry which has grown its net worth by a factor of 1000 in five years, created 2 million+ jobs and made who knows how many millionaires is "deflated"?
Don't confuse the difficulty of picking stocks with what real wealth creation has happened in this period.
--- Hot Shot City is particularly good.
Yeah, I'm a bitter person ;-)
Institutional investors account for some 75%+ of the total traffic.
Where do you think those institutional investers get their money to invest? Baby boomers (amoung others like me) give them money to invest. Now I don't claim to know what will happen when they are all withdrawing funds not adding to them. However institutions still come down to money.
BTW, information I've recived from a source I can't recall (but I think it was goverment) suggests most americans were net sellers of stock during the run up, it was foreign investers doing the run up.
The stock market is more like a rubber band; when undervalued it will rise (for example, technology after october 1998), when overvalued it will fall (for example, internet companies after feb 2000).
Well let's see - options are about 32% under water well into their 2nd vesting year so that gift is worthless. About 25% of my cap is in tech stocks which are about 75% from where I bought them. Everything else is steady or better, marginally so at least better than any other instrument like a CD or a mutual fund or index of any kind. My accountant says I need well timed losses which is where the tech stocks play today.
Wrap it all up and I'm still working, still employed, still have to be. If my expectation was to become a dotKommissar cash out and retire to Fiji well that isn't going to happen. I'm a dotCommoner instead. My employer is grinding through its annual "...Times are great! We have to cut 10%!" bullshit gyrations.
Those were mostly my expectations. OTOH I've been doing this for neigh on 2 decades so it's not as if I just graduated went to work for a startup and went belly-up in 8 months later. The economy and this sector is still growing rapidly, more rapidly than at any other time execept for the prior 3 years. And yeah it would have been nice to get in on the Yahoo IPO but that didn't happen either. Most of us are not going to retire @40 get on the board of a Ballet company, start a foundation, trek through the Andes and get a trophy wife. Conversely most of us at least now are not in the position that EE's were in in the late 70's/early 80's, or MIS types 87-92 where you got laid off the week before Xmas, had to reapply for your job and take a 25% cut.
'Every country is three meals away from its next revolution' (quoted on Red Dwarf, it's from Tallyrand, I think)
Dont worry so much about the short term. The past decade has been great even is 1990, 1994 and 2000 were bad years.
My theory is that all the nice sugary capital that gets stirred into the mix so rapidly is an irresistable lure for the fungi-people.
When it finally falls and the fungi-people all kind of die off or go away or whatever they do when the sugar-daddies have all gone, then you can actually make some real bread!
Anyway, that's what I think.
Seastead this.
"Some people in the music business make a lot of money and put it up their nose. I put mine in my ear." -FZ
Career-wise, the dot com madness has certainly benefited me, even though I wasn't a part of the "dot-com industry". I've been a software developer my entire career, but it's always been in embedded stuff, either in the public sector or in consumer peripherals, never in web development or any of that. I've risen through the ranks as a wage-slave programmer and then project manager, and am now a happy consultant in a small, specialized firm. I'm sure the better economy, helped in large part by the Internet boom, was a factor in my upward mobility -- but I work hard and I suspect I would have done fairly well regardless. I'm no dot-com millionaire, but I'm not crying either.
To me, the best thing about the web hype was the commoditization of the internet. Sure that's got its ill effects, for example the millions of idiots, the script kiddies, etc, etc, but it also means good things like $40/month 1500 kbps ADSL connections, cable modems, etc. Despite being stingy and greedy, the big corps realized that there was a gold mine out there on the web (or thought there was), and they knew that if they were going to keep the hype going they were going to have to deliver a better experience -- thus the higher bandwidth, lower PC prices, etc. Whether or not we like the content, the fact is that the dot-com boom benefited everyone by motivating big slow businesses to improve the communications infrastructure.
And, more importantly for me, the inescapable hype surrounding the internet caused vast numbers of ordinary, non-Internet-oriented companies and consumers to realize that the Internet exists and that it can make their life easier. That certainly hasn't hurt my consulting career...
There are two distinct (for me, anyway) topics: stocks and jobs. Since I don't depend on the stock market for my income (and yes, I do realize that I'm different than some IT folk in that regard) what the stock market does has little impact on my quality of life.
That said, there are still some great tech stocks out there, maybe not all on the Nasdaq, but good all the same. Even at today's low-end pricing, my holdings in JNPR would have to halve before I'd see a loss, and the upside potential is still great despite the market burp. AAPL was and is a great buy, rarely do we get the opportunity to buy what was an $80 stock a few months ago for 1/4 of that price. 'Course, that assumes that it'll someday become an $80 stock again -- a leap of faith I'm willing to take given the miniscule downside risk. On the NYSE, my TWX and VZ aren't superstars, but they're up from where I bought them -- not bad, given the bleed-out of late.
There are good technology companies out there, but investors who have never evaluated stocks based on quality, value, and business acumen have no idea how to find them. Having invested since '82 and lived through '87, I'm having a field day on the buy side. Cheap, cheap, cheap!
On the topic of work, while my technology employer has had some troubles this year, they have not been laying off the way that their peers have. My options are worthless right now, but I'm still at work, still making decent money.
Let's put this into perspective. The labor (and I think Commerce) department(s) keeps track of the "IT Sector"'s shorthandedness fairly closely. The last number I heard was that the U.S. would continue to fall short of supply (e.g. workers) for new IT jobs at a 25,000 per year clip. Per year! I went through all the articles I could find on Yahoo and Fucked Company and added up the losses -- about 5000, maybe 8K. 10 at best, given that I probably didn't find them all. So, a little more than 1/3 of our job surplus for one year has been eaten up by tech layoffs. And, consolidation will soon enough kick in and the tide will slow.
I realize my advice isn't much solace to the folks at Britannia.com who just lost their jobs. But, for quality workers (or contractors) who know what they're doing, there is more work out there than workers. I think that at best a tightening of the market will help sort out the wheat from the chaff, and allow employers to be more selective than "do you have a pulse?" That will make the sector even more efficient and competitive, and we'll all benefit from that. In fact, I'd go so far as to say that there'll be another boom in the IT sector, just as soon as this consolidation completes it's cycle.
-- "In order to have power, I must be taken seriously." -Mojo Jojo
Economists have a simple, but profound, explanation for this. (I am referring to those who actually study economic theory, not people on Wall Street who declare themselves economists and make predictions just as unreliable as anyone else.)
If it were easy to predict which companies would make a lot of money, well informed people with a lot of money would have invested in these companies, so their stock price already reflects what can be predicted. Even if the smart people don't have lots of money, they can start their own investment fund and rich uninformed people will give them money to invest, with the same effect.
If investors didn't behave this way, any smart investor could make huge amounts of money by betting on the companies that have good prospects. There would be lots of "$500 bills left on the sidewalk", and we don't see that - people pick them up when they find them.
The result is that stock prices usually reflect what can be figured out by smart people with industry knowledge. Stock prices can move wildly, but that is because there is a lot of true uncertainty about how a company's performance will turn out (nobody knows).
Unless you have inside information that no one else has (and it is not illegal to trade on it), on average you won't do any better than the market average return (adjusted for the riskiness of the stock - risky stocks have to have higher returns to get people to buy them.) Bubbles like the run up in the value of tech stocks make it appear that anyone who sees a future in IT is an investing genius, but the bursting of the bubble shows the fallacy of this.
Most investors, including fund managers, who make lots of money on the stock market are lucky, not endowed with an ability to see things that no one else does. Look at the best performing mutual funds in the months and years after their exceptional performance. They usually do worse than the market. So buying a fund that has already done well is usually a bad idea.
The upshot of this for you and me: pick a broad market index fund that will give you average market returns, but with lower variability than a narrow stock or fund, and much lower expenses (the only certain part of your rate of return) since the fund manager is not buying and selling all the time. Broad index funds outperform 70% of mutual funds, mainly due to low expenses. Look at your stocks and see if they have performed better than the S&P 500 over the past ten years, and how much more variable (risky) they have been.
You rarely hear this advice because no one makes money giving it, and financial types have to admit they don't accomplish much. Financial advisors get no commissions from these barebone funds, so they don't recommend them. Check out Vanguard index funds because Vanguard is in effect a cooperative owned by the investors - it has no financial incentive to sell you things you don't need that make high fees for the fund owners. Vanguard was created by large pension funds to introduce the first index funds.
IAAAE (I am an academic economist.)
AnhZone
Patriotism is the conviction that your country is superior to all others because you were born there. (GBS)
I thought if you got bought the options had to be bought out...
---
DO NOT DISTURB THE SE
There's no problem selling the stock if you bought a stock which has a reasonable value. The real losers are the people who bought stock which lost most of its value -- but the losers do not affect the other companies much. Except for the dividends (company profits) which are pumped out of your stock -- or pumped back in if you reinvest them. And in the meantime your real job, and the non-catastrophic companies, are creating more wealth which gets scattered around in various ways.
Yes, it's fall, and time for the third annual "the bottom has fallen out of the tech stock market! the honeymoon is over! the sky is falling!" fest.
The Nasdaq's down, yes, but so is every other market in the world year-to-date except the TSE, and that's only because of the performance early in the year of a stock that has 30% of the TSE's market cap. The tech sector is down this fall, yes; and last fall. It'll recover. Ignore market psychology and value ratios and technical indicators for the moment, and think: every day slashdot posts about new and exciting technology. Progress and the level of technical achievement in our culture advances continually - the only thing that can hold the tech market back is a fundamental restructuring of society - but if that happens you'll have worse things to worry about than what your dotcom stocks are doing. It's a geeky world out there and it'll only get geekier - so buy a mixed basket of techs while they're cheap and hold on to 'em for 20 years and retire.
How's my ride been? Well, I'm 30% up from where I started, and when the market recovers, I'll be doing even better. "Welcome to the wonderful world of high technology."
The stock market is liek the weather,as soon as you think you udnerstand it, it will change.
Att he end of the day tehre were two kidsn of tehc stocks, those that were legitimate investments in companeis building the infrastructure of the future, and speculations on moeny making schemes in that infrastructure.
Investemnts in infrastructure companies (for instance, my own Sun stock) have been resiliant and IMO will recover as they haver in the past.
Wild schemes with no profitabiltiy i nsight,ill die.
This is just normal market consolidation. The death of the tech sector, to quote the man, "has been greatly exaggerated."
Predicting something by looking at the stock market index is called Charting. In my book, it is vastly similar to astrology, with an interesting twist, as the market is self-referencing (people look at market prices, take decision because of the prices, which is then reflected in the prices itself). Such value is not linked to the fundamental that the market is supposed to represent, and is the bubble we see. This may also be the root of the chaotic components found in market prices (chaos and feedback go hand in hand).
In particular, I would draw your attention to this graph, which compares the overall returns of the NASDAQ composite and the S&P 500 since 1985. Observe how closely one tracks the other [...]
Personally, I'm a strong believer in the efficient market hypothesis
I stop beleived at the efficiency of the markets shortly after I started working with option valuation. It is amusing to taklk about beleiving in market efficiency. Is capitalism already a religion ? :-)
it's not clear to me that the long-term valuation of any given stock will outperform the index.
About your MSFT example, I want to point you to the fact that the theory (well some of the various theories) actually pretend that everything will happend in the future. One day MSFT will get in par with the S&P, for which ever starting point you choose. One day it will also be twice at 200%, and another day at 50%. All those events will occur an infinte number of time.
MSFT crossing the S&P. See this graph 2 Years
MSFT halfing. See 1 Years (From 15 march to 15 oct)
MSFT doubling. See 5 Years (Doubling occurs somewhere in mid 98)
If you look at 1 Year MSFT you can see that in those current days, the volatility of MSFT is high. But what can you deduce from that ? Only that the various events (crossing, doubling, halfing) will occurs faster. But you don't know if MSFT will double before it halfes, or the opposite.
The idea is that if such a knowledge was possible, it would already be reflected in the market price.
Note that I am not arguing that the stock movment is random. There is a stochastic componenent on top of a fundamental. In the MSFT/ORCL case, the fundamental is the emergence of high-technology. When looking at the 15 years MSFT/ORCL graph, it is clear that something happened. But the past tells us nothing about the future, and we don't have the singlest clue about how this fundamental will evolve by starring at the stock market index.
Cheers,
--fred
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Now I don't claim to know what will happen when they are all withdrawing funds not adding to them.
It is a common misconception that when boomers retire they will sell all their stock. Won't happen, and the reason is that people now live 20-30 years after retirement. If you sell your stock when you retire you will lose out to inflation and you will not have enough money to sustain yourself at the end of your retirement. Another factor that is having a huge long term impact is the fact that the government is retiring bonds - with no government bonds to buy people are missing one of the key alternative investments so will have to put more of their moey into stocks.
The fact is that the stock market fluctuates. Get over it. Look at the long term trends (20 year time frame) stocks go up and down over the course of an economic cycle out of phase with interest rates. Interest rates have been going up, therefore stocks have been going down. In 1995, when interest rates went down, the market went up 40% in one year. The macro economic fact of life is that technology companies grow faster than the rest of the economy, so should be overweighted in your portfolio.
People who play the stock market with less than a 5 year time fram are gambling, period. There s no way to predict in advance what the market is going to do over a shorter period of time, so you are placing a wager whose outcome will depend on random fluctuations, just like any throw of the dice.
That said, I bailed like all getout back in the 1st quarter. Total portfolio up 17% ytd, not bad when the market as a hole (sic) is down.
I invested in companies that actually made physical objects that people could buy. That had profits, and a decent business model.
Back during the .com hype days, my investments looked like dogs. For example, I have a fair amount of drug company stock, having worked in that area- they sucked then. But now, they've been going up the entire time of the .com crash. My high-tech stuff has fallen, but only to the level it was last year. Big whoop: I'm still ahead on all of it. Invest long term- you'll make more.
End result: I've made money since the crash started. Not a ton, but then again I don't expect 100% return/year.
Eric
"Seven Deadly Sins? I thought it was a to-do list!"
Unfortunatly when I was working there the company was in the services area - troubleshooting networks, implementing solutions and other technically proficient things. Unfortunatly, due to the incompetance of the person in charge of my department at the time, we lost a lot of customers and didn't gain new ones.
Meanwhile another team in the were working on a web server 'intranet' product, whilst abandoning the installation of firewalls and web servers as being 'too hard'.
Eventually the work in my department became no more than a call centre. I was transferred to the support team for this new product, and discovered it to be utter junk. Even the customers using it hated it. The product was more marketing than programming. I spent a few months on that team, handling customer support calls, then left to go elsewhere. I'd have stayed longer if they'd let me get my hands dirty actually solving their development problems.
A year later they IPOd on one of the minor UK exchanges, and offered a stock option. Their stock price reached around 3.75 times its debut price, but has since fallen to twice its debut value. The software itself is still junk, and it appears that most of the development team have left as the version number of the software has hardly changed in almost 2 years.
The division I worked in seems to have closed down. The website hasn't changed in 18 months, around the time that the person responsible for all the problems was fired. Everything is now this one piece of software.
I'm just waiting for their market price to crash.
And what am I doing now? I'm involved in the development cycle for stock-market dealing systems.
Yes. As the original sentence is in a conditional statment, you can put those too if you want. And amazon. And rambus. And microsoft. Whatever you want.
Btw, did anyone already noticed that while ESR is a stock symbol while there is no RMS, nor GPL ?
http://www.cnetinvestor.com/quote-fast.asp?symbol= ESR
Cheers,
--fred
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Since stocks are tough to predict is might not be completely accurate to say that this is the end of the tech boom. Another could be around the corner. This is probably just the market shedding its excess baggage, competition is grew because there were more companies getting in so the weaker ones had to fall off. You could also say that the early predictions of the growth of the online market itself were overly ambitious, something that didn;t exactly help keep the enthusiasm high.
Luckily there are companies and people out there who aren't in this for the money. Good thingd will continue to happen on the internet, they just might not be profitable things.
Icebox
The primary effect of the drop in tech stocks is the increased wariness of investors in new and, potentially, innovation ideas. Media hype is predicting the end of a 'dot.com bubble', and this seems to be interpretted as a complete collapse of the internet and e-business industry as a whole.
What is more likely to happen is a simple weeding out of the poorer companys, those without a solid business plan or revenue model. Certainly this'll include some major players, boo.com is a prime example. Whereas, a year ago, investors would throw millions at any project that ended in dot.com now they're going to actually look more closely at the real-world prospects of an idea. I reckon this is a positive thing. The recent glut of internet companies that are little more than a complete waste of time should cease, and maybe investors will have more time for the more innovative ideas such as Indrema and such.
http://twitter.com/onion2k
No different than dropping coins at Vegas.
For all the winners there are losers. Remember you don't win unless there is some one out the BUYing the stock from you. Or maybe two or three or four (depends on how high).
For those older hand with stock options - cashing out - making look like a great thing for those just joining - but is there a future?
Is the stock market the next Social Security scare?
Remember to retire with those 401k - the stock needs to be sold to some one. Who will be buying when the first 1/4 of the bady boom goes by, the second 1/4, the third and fourth?
I was reading that if Microsoft had to report the outstanding liability of stock options on thier balance sheet (better: deffered companision) Since MS is to pay the difference between the option and the going price. they would be setting at a net LOST for last year.
Isn't math fun?
I haven't been affected directly in terms of my job/career since I work in academia, but I have been investing most of this--err rather the previous--decade. The tech stock scene looked like a gold rush. You had a lot of hopeful prospectors rushing in hoping to make a million on the the new big thing. Most of them went or are in the process of going bust because the new big thing wasn't that big. It was and still is big, but not big enough to support anyone who's read Small Businesses for Dummies and can put togehter a business plan. So, the people who are still around and going to be around are either the true visionary innovators or the people who build the roads and provide the services that all the prospectors use. So, the dot coms are coming apart, but the Ciscos, the Oracles Red Hats, and the rest are still around, and getting bigger. So, as an investor, I had healthy mix of things and made a quite a return on investments during this period, but because I have a mix, the downturns didn't hit me very hard. The tech stock boom on the NASDAQ has helped turn a modest savings into a sizeable nest egg, but the diversity of my portfolio has cushioned the down turns. I'm doing good as we come out of this rush, and looking for the next opportunity to put a small part of my money in.
There's another flip side to the tech stock boom. As the 1990s progressed, the number of new technologies I had to learn at any given time skyrocketed. The boom meant that a lot of people were developing a lot things. The past five years turned most of computer science upside down and shook it. When I last looked at my resume, I have well over a dozen languages listed. Most of these I've learned in the past three or four years. The other affect of the boom is the amount of new information services you see people offering at all levels and all sectors. It's been a wild ride from a purely technical point of view too.
I had a stable job at a large brokerage firm, but felt I was missing out on the chance to get rich quick by not working at a dot com. So four months ago I left the stable job for a job at a pre-IPO dot com startup. I received a decent salary jump and options. I knew it was a gamble, but I kept hearing stories of 25 year old millionaires and I wanted to be one of them. Well, about a month ago my company laid off almost half of its employees (not me though), and the future here doesn't look much better.
In the long run I guess it worked out for me. The brokerage firm I worked for asked me to come back and I agreed. I'm currently finishing up my two weeks notice at the dot com. I'm getting another bump in pay and a promotion to go back. No, I didn't become a millionaire, but I got two large increases in pay and a promotion in 5 months and will be back in a stable job.
"and the only social disease I've contracted is bitterness!" - Collider
I worked for buy.com, their stock IPO-ed above $30/share and my position was, on paper, worth over $2 million. Then the market tanked, buy.com continued losing money, B2C became out of fashion with investors, and by the time I was allowed to actually sell some stock 6 months later I was under water...$2million to $0 in less than 6 months. Thank heavens I never lived like a millionaire like some other employees who took out huge loans hoping that they could pay them back once they could cash out their stocks.
Being part of the management team of a start-up is a truly unique experience and I would do it all over again for that reason alone.
Interesting observation. I went to work for a heavily-funded startup about a year ago. Management there was composed of former middle managers at some established companies. And they were very competent people, at least in a larger environment. Nice people, too. But over the course of the the last year, it became apparent that, while they may have been very competent working in an established company, none of them had ever run a small business. They thus lacked the perspective one gets from having all the weight on one's own shoulders; if one or more of them had ever run a neighborhood dry cleaner, some things would have been done differently. As a middle manager, one learns to cover one's tail, to do the proper analysis, make the safe decisions, and you're somewhat insulated from the effects. The process is more important than the results, as far as career advancement is concerned. In a startup, the results are all that matters.
That said, the compay's business plan was doomed, simply because investors had wildy overestimated the market. So that company wouldn't have been profitable even it had been run by Ellison and Gates.
Likewise, I've talked to many other former employees, and few have expressed any regrets. The only ones who were really hurt were those who left good jobs at established companies seeking riches. But those of us who went in with realistic expectations (I always expected to be laid off, I just figured it would take a few months longer), enjoyed the experience, made some great friends, and the fact that I was able to come away with no bitterness really helped when I went job hunting.
That, or their business plan said something like: "After we gain a monopoly in our area, then we'll REALLY rake the customers over the coals."
Later,
Erik Z
Democrats or Republicans. They are both taking us to the same place and they are not afraid of us anymore.
> I think that we may be able to conclude that the Internet/Tech Stocks bubble has finally deflated
I think we are not able to conclude anything. The Internet/Tech Stock 'bubble' may still be present, and can put the world economy in a recession cycle, when the averge john doe will understand that the money he borrowed to day-trade have disapeared. Or it may rise again, when all the stupid (pets.com) or badly managed (boo.com) startups will all have failed and the few remaining will start trashing brick-and-mortar economy.
You cannot predict anything by looking at the stock market index. No matter how hard you try.
Cheers,
--fred
1 reply beneath your current threshold.
no problem for me.
Being one third owner of a tiny internet company (5 employees total), business has been good for the last year and we've paid ourselves. We're thinking of investing in a new kettle and maybe another monitor and a keyboard this month. The strength of our company position in the boom economy means we are tentatively expanding to buying two types of coffee and maybe, just maybe, three types of chocolate biscuits. Might print some business cards to diversify our holdings. Been following NASDAQ closely. ;-)
The way in which the overvaluation of tech stocks affected me most was that people I meet who aren't familiar with computers keep going, "So. You're in computers. Are you rich?" And I would say, "No. I work for a university." And they'd say, "Oh." And that was pretty much the extent of their interest.
I, too was working in a classic dot.com in May, just as the bubble burst. No problem, I thought, this company actually has a workable idea that could be profitable within two years, and they aren't just another portal or shopping site.
What I hadn't realized was that everyone except the CTO were part of the idiots that think the internet is a magic money machine where the rules of good business don't apply. You had an exec from a failed department store who was nominally a CFO acting as a COO, a COO acting as a CEO, a sales staff who would simply tell the customer anything they wanted to hear (and charge them a tenth of the cost, literally), whether or not ANY company could do it, let alone ours, and no one other than the CTO had ever been in a tech company, even peripherally.
As many people here know, a good tech department does not a well-run company make. Soon the tech staff became the scapegoat ("Well, if they would just work harder," said the marketroid, as she left at 5pm on Friday not to be seen till 9:30 Monday), people were fired right and left to make up for the investor shortfall, and the workload didn't decrease.
Somehow I'd remained quiet enough that I was deemed "safe" because I wasn't in my early 20's and therefore sympathetic to management (wrong). I got a nice promotion and pay raise which enabled me to find a company that was self-financed (that's a good thing) and more along with what I wanted to do to advance my career.
The silly politics at the dot.com had started long before the bubble burst, and this simply forced the issue. So it got me out of a bad situation in record time while putting me in a higher tax bracket and a nice spot on the resume. Oh, and now I'm the one who goes home at 5 (well, 6 or 7, but not 1 or 2). The new company has no marketroids, and everyone comes from both a tech and a substantive background in the field we're in.
Yes, I benefitted from the reality check. The bubble is dead, long live the tech sector!