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Another Dot-com Boom?
Ryan Hemelaar writes "CNN Money is reporting that the internet might be at a stage of another dot-com boom, with the top tech stocks now gaining ground again after the dot-com crash. From the article: "Now, 10 years after two key events in the history of the Internet -- the successful IPO of Netscape, which many cite as the beginning of Wall Street's love affair with 'Net stocks, and the founding of Yahoo! -- we're in the midst of a new, let's say mini dot-com boom.""
Not to mention Google's IPO today, which has been valued quite highly.
Google is a great company with some really good services, but where does their core revenue come from, other than ads and maybe sales of their few SE boxes?
Makes you wonder, once again. Remember - it does not matter if you have the greatest idea on Earth, if your revenue is not from tangible assets (for relative measures of tangible ofcourse), the market will put you down eventually.
This is what I'm scared of - if things like that do happen, we'll once again go into an IT industry crash.
It's this kind of speculation which drove the first dot-com boom... and eventually burst the bubble.
OLPC Australia
The gangsters in the movie are nervously sitting around in the hotel bar waiting for the hurricane to hit. Rocco, who's a tough guy but can't stand the tension, orders one of his underlings to talk. The most cheerful thing the thug can come up with on the spur of the moment: "I think in a coupla years, maybe, they're gonna bring back Prohibition."
Post may contain irony: discontinue use if experiencing mood swings, nausea or elevated blood pressure.
Look at that PE. Do the fools never learn?
Too true.
Generally, it's one boom per industry, then people settle down and start working at it. Just because stocks are finally rebounding doesn't mean the gold rush is back.
ad logicam Claiming a proposition is false because it was presented as the conclusion of a fallacious argument.
GM has been in business since 1897.
Through that time, they had decades of profitability. They also had many years of losing money, as they do now.
By your "snapshot in time" evaluation procedure, you should buy a stock when it's hot and sell it when it's cold. Buy high, sell low? That's precisely the human-herd mentality that causes so many people to lose money in the market.
Google is a great company, but at this stock price, your only chance is the "greater fool theory". Maybe someone dumber than you will come along and buy Google stock for $350 per share.
I'm a big tall mofo.
GM has a major outbound flows. I was reading how of every car they ship $1600 goes to just Pensions. Their stability is declining. Income from tangibles is all well and dandy, but Google's has next to no materials overhead which tips the scale. Still it's not the income, it's the long term stability. Keeping Google afloat is cheap. If a goose eats $100 bill then it better lay golden eggs and this goose is laying some nice golden eggs. Once last word to the to wise, playing the stocks is like surfing. You ride the wave till it falls. Long term anything in the stock market is a fools game.
Sorry about the writing. Robot fingers, you know? Cliff Steele in DOOM PATROL #23
Booms are good. Insane run-ups like the dot-com boom in 1998-2000 are not. I graduated right into it, and ended up working in IT for decidedly non-dotcom companies the entire time. My reasoning: I was learning, so I might as well start with an established company. Turns out that was the right decision, even though it really bothered me watching people I knew changing jobs every 6 months for 30-40% pay increases!
If you want another example of a bad boom, just look at the housing market lately. I read a statistic the other day that said interest-only mortgages have reached 40% of all loans made in some housing markets. Just wait until interest rates go back up and the interest-only period ends. People will be paying way too much on houses that aren't worth nearly what they bought them for. I see this going on in my area, and I just wonder when the market is going to tank.
Market bubbles seem to occure every 3 generations. The big ones that come to mind are Dot-com, 1929, the railroads, the colonies, ... Dutch tulips... seems every 3 generation(s) that has their savings wiped out and dreams dashed wise up to the chants of "this changes everything", "this market is different", "these properties will only gain value", "these prices will last forever". I think it will be another 50 to 75 years before there is a new buzzword technology and enough new suckers who can't remember the previous crash.
Long term anything in the stock market is a fools game.
Let me make a modification for you:
Long term any single thing in the stock market is a fool's game.
A balanced portfolio of domestic small-cap, mid-cap and large-cap stocks along with a smattering of international funds and bond funds is the only sure bet long-term. Anything else and you might as well put it all on black at the casino.
Never mind. I forgot - you're better at picking stocks than everyone else in the world, and your winning streak will never end. Good luck with that.
I'm a big tall mofo.
The four most expensive words in the English Language: "This Time It's Different"
If I was that drunk, I would have remembered it -- H. Simpson
Recovery? More like a dead-cat bounce.
How in the world this was moderated insightful is a mystery.
Never have more people used the internet in their daily lives - from buying odds and ends on ebay, to doing their banking, to reading the news, to fulfilling their consumerism pangs through ecommerce sites. The internet as a whole is much larger, and more robust, than it was in 2000, and it is a far more pervasive part of even more people's daily lives.
This is a bad time to be looking at a financial crash, because there is an energy crash looming too, and surviving an energy crash (in anything like the form we want our civilization to have) looks like it will require a large amount of capital to build non-petroleum-dependent infrastructure. But where's that capital going to come from if there's a financial crash going on at the same time??
"consistently buying these stocks with P/E ratios of 300 and higher"
I'd rephrase that a bit. It was so crazy back then that any company with an actual P/E was pretty much frowned upon. The momentum went toward companies showing deals and eyeballs. Even the top-line dollars from the deals didn't matter; any press release with AOL would guarantee a 50-100% jump in market cap (usually in a day). I even customized my PR feed to catch the three letters "AOL" and automatically buy any other ticker in the release. And it worked just about every time.
The profit/earnings were strictly secondary. The mantra was to spend wildly on Aerons and salaries and claim as much of the "new West" as possible. The internet was the biggest innovation since the automobile. Everyone from cab drivers to CEOs believed this and stated it daily on CNBC and the mainstream press.
It's tough to look back without the benefit of hindsight so others may remember it differently. Fwiw, that's my recollection.
The average compound return from 1965 to 2005 on the Dow Jones is a little under 7%.
Dow Jones in 1965 = 800 (approx)
Dow Jones in 2005 = 11000 (approx)
factor = 11000 / 800 = 13.8
now we have
(1 + x) ^ 40 = 13.8
1 + x = 13.8^(1/40) = 1.067817
x = 0.068 = 6.8 %
I agree with you that it looks very good, however you have to substract inflation from that good return, and in the 70s inflation was well over 15%.
clicky