As the late 1990’s dotcom era began to wane in mid 2000 CNBC was dominated by those chanting that the tech entities making actual money were the future. EMC, Microsoft, Intel, Cisco, etc. were the focus and they were certainly cheap. Consequently? Yep, those stocks went up while dotcom disected.
My investment club had a total portfolio of $125,000 in 1995 per its 25 members as we had once again (we distributed money out to members several times through the years) had a distribution, the market had done so well. Wasn’t long owneing those tech stalworths, until we had $1.3 million in 2000.
We had a meeting; I profiled Cisco’s accounting stating, “They use stock for all cap additions and a bunch of operating expenses…using this accounting (remember stock options were off the books) I see no reason why Cisco can’t buy all the stocks in the world…as all cap additions will add to the bottom line given the stock sells for 100 times earnings.” I continued, “Is there any way I can sell my part of our portfolio and stay a member os the club?”
All members remembered my speech for years. At the time they were completely confused at how I could be so aware of Cisco’s advantage…yet want to sell my shares of the club’s portfolio.
And so it goes. The Tesla’s of the world are rolling in it. They are a giant freight train with endless momentum. Forum posters chant how stupid it is not to go full in. Saul’s board, if there wasn’t a limit, would have thousands of “likes” to each post.
And the bitcoin/cripto gathering where I play trivia on Tuesday night had to move to the adjoining bar where they meet outside. Doesn’t matter if it is 30 degrees fahrenheit several hundred people stay until midnight…the passion is there and it is insanely intense.
And this of course will continue forevermore. There is no limit, the charts to upwards to to the right now and forevermore!
Be careful of these nonsensical posts stoking fear. Many lost decades of compounding due to fear and going into cash.
Ever wonder who is buying those yachts, give to charity, funded retirement and health care accounts and fly first class ?
These investors believed that innovation will solve global problems.
They stayed invested, worked hard, slept well and got rich slowly.
Just remember that the guys in my club that got burned with tech are the very ones that would not hold Microsof. we bought in the mid 20’s when Balmer was considered awful and sold in the 80’s when the PE got “too high above the 15 times earnings line.” And so it went with all our growth stocks, they sold them. The same guys that were happy at 100 times earnings now won’t hold any growth stocks.
Interestingly the local women’s club, and my wife is a member, did not participate in the late 1990’s tech run-up. And for a while we trounced them…then came out about even. But the women were willing to hold the growth stocks and now have trounced us for the last 20 years. They own the MSFT, GOOG, FB’s and such. We don’t. We own BMY, MRK, OMC, INTC, IBM…and it couldn’t get any worse.
The boys bailed on stocks like AJG and LOW long ago because they have vivid memory with added PTSD!
We will see how the current bubble affects the “in” crowd. I just watch and hold those terribly overvalued growth names for the most part.
Old dealraker predicts one more I-N-T-E-N-S-E run up of the bubblicious names!
I wish Berkshire had used some of that cash hoard on GOOG.
Buffett said a few years back that he “missed it” but it still seems like a good buy today. It has so much of what Berkshire likes in an investment so I’m just curious why he never pulled the trigger. Instead he buys VZ. Not just Warren but Todd and Todd as well. They seemed to have avoided it like the plague.
I remember 1999-2000. Everyone and his dog who were invested in technology stocks made a lot of money.
I was hurting; Berkshire went from around $80,000 in early 1999 to around $41,000 in early 2000. One investor told me to change my method. I told him to pound sand. I changed nothing and was vindicated in March 2000 when the Tech/.com/tele-communications stocks started their downward spiral and the stocks like Berkshire rebounded with a vengeance.
The rout in tech stocks was brutal. On October 9, 2002, the Nasdaq Composite closed at 1114, a drop of 78% in 30 months.
I don’t know how the index for the NASDAQ 100 is calculated, but I found that the annual returns for the NASDAQ 100 were: 2000, -36.84%; 2001, -32.65%; 2002, -37.58%.
Buy and hold is not a suicide pact. I doubt if either Buffet or Munger would had advised holding the tech/.com/tele-communications stocks at the beginning of 2000. Many of today’s investors were not following the market in 2000. They didn’t live it. But they can study it.
Over 23 centuries ago, Sophocles wrote in his tragedy about the Siege of Troy:
Far-stretching, endless Time
Brings forth all hidden things,
And buries that which once did shine.
The firm resolve falter, the sacred oath is shattered;
And let none say, “It cannot happen here.”
<<Over 23 centuries ago, Sophocles wrote in his tragedy about the Siege of Troy:
Far-stretching, endless Time
Brings forth all hidden things,
And buries that which once did shine.
The firm resolve falter, the sacred oath is shattered;
And let none say, “It cannot happen here.”>>
Benjamin Graham begins Security Analysis with
a quote from Horace:
“Many shall be restored that now are fallen
and many shall fall that now are in honor.”
I don’t know how the index for the NASDAQ 100 is calculated, but I found that the annual returns for the NASDAQ 100 were: 2000, -36.84%; 2001, -32.65%; 2002, -37.58%.
If you had perfectly bad timing and dumped all your money at the peak NASDAQ (5408 on March 10, 2000,
as of today your CAGR would be 5.3% with NASDAQ at 14000 +.
Nothing to write home about but more evidence that dollar cost averaging works.
On a related note, Google up 9% after hours. Innovation works.
Like Elias Fardo, I remember 1999 going into 2000 quite well. We were holding Berkshire and some other value type stocks. We also had a tech stock involving an itty bitty database company that had developed web interface arrangements for its database enabling thin client type operation. We were using its conventional database for our full accounting suite and were paying a developer to develop a means to make it all happen for our company’s use of this new thin client feature set. The stock zoomed up five-fold in six months with publicity of its interface while at the same time it became quite obvious to us (after spending $75,000 to the developer and not getting the desired result) the company’s software was not going to provide our envisioned Nirvana for our company (today we use Netsuite and the desired aim in 1999 was not too far off from what we now have in Netsuite).
In late 1999 tech stocks had zoomed to stratospheric valuations and I knew a crash was imminent. We gifted the maximum amount of our holdings in this tech stock to our children that Christmas and instructed them to sell immediately the first opportunity in January (2000). We also sold our remaining holding in that company the first week of January. It was close call as a short time later that company’s stock value plummeted.
Benjamin Graham begins Security Analysis with a quote from Horace:
"Many shall be restored that now are fallen and many shall fall that now are in honor."
Speaking of Graham, here’s a copy of a speech he gave in November 15, 1963:
“Security in an Unsecure World”
"But you cannot say that the fact the stock market has risen continuously (or slightly irregularly) over a long period in the past is a guarantee that it will continue to act in the same way in the future.
As I see it, the real truth is exactly the opposite, for the higher the stock market advances the more reason there is to mistrust its future action if you are going to consider only the market’s internal behavior. We all know that for many decades the typical history of the stock market has been a succession of large rises, in good part speculative, followed inevitably by substantial falls. Consequently, the substantial upsweeps of the past have always carried with them warning signals of unhappy consequences to come.
It does not necessarily follow that a large rise in the price of an individual stock or in the market averages must be followed by a decline; but the only reason to view with confidence the future price of a security that has already advanced substantially is the presence of external reasons, other than the actual price movement itself, which would justify such confidence. Hence a large advance in the stock market is basically a sign for caution and not a reason for confidence."
The Dot Con bubble was just a warm-up for today’s simultaneous asset bubbles. After the Dot Con bubble collapsed, I never imagined that anything like it would happen within my lifetime. Of course, I was wrong. It seems that everyone has forgotten all the lessons.
The most idiotic bubble in history is the bond bubble. Normally, an asset bubble relies on the hollow promise of a jackpot to reel in the suckers. The bond bubble does not. It’s like buying a lottery ticket for a lottery in which the winner gets his/her money back.
The second most idiotic bubble is the meme stock bubble. Normally, a stock bubble lures in gullible suckers by promising to revolutionize the world or be the next Apple/Microsoft/IBM/other top name. This stock bubble does not.
The third most idiotic bubble is the cryptocurrency bubble. Unlike stocks, cryptocurrencies aren’t shares of a business. Unlike traditional inflation hedges, cryptocurrency doesn’t have utilitarian value. At least you can build things on land, you can live in a house or condo, you can burn oil for energy, and you can cook pork bellies for food. Also, cryptocurrencies have risks that no other asset class has. In fact, I’ll bet that there are even more risks that aren’t known yet.
The talking points of the cryptocurrency bubble sound a lot like the talking points for no-money-down real estate, Dot Con stocks, time shares, and precious metals.
Since BTC has no value it can only be hucksters pushing their junk on unsuspecting novice investors. I still remember my first real exposure to BTC. This crook was trying to get me in after a big run-up to $800. I wisely declined making a purchase and avoided a big sell-off. These mo-mo guys aren’t real investors.
with due respect, the cryptocurrency story has not played out yet. At some point in time, bitcoin mining is going to stop as too uneconomic. Once that peg to energy consumption costs is removed, what will decide the bitcoin price except pure supply and demand?
there is no law enforcement behind decentralized finance unlike traditional fiat currencies. What happens if some entrepreneurial lad steals all of senile senior citizens’ bitcoins? Absolutely nothing, and everybody knows it. It has happened to many times already.
Bitcoin is going to die out, how violently or slowly remains to be seen.
The Facebook setting is interesting to me. I bought some FB long ago and added tads here and there and I did that simply based on my use of the site. But reality is upon us now it seems.
If FB is peaking in use and in outperformance of growth? Oh my! It isn’t FB that I’d be so alarmed holding, it is the others who compete with them…the entire industry.
We go through these stages and I do find them incredibly stimulating. The Tesla thing; the Saul’s board stocks; it just makes those models stick out with so much clarity! As long as earnings are none or incredibly small any presentation of any overwhelmingly positive future sells and sells well. You can create your own club or forum and set rules and people join-up in droves. It works.
Then there’s the earnings years and the Facebook’s, Google’s, and Paypal’s go for a long time. But watch carefully because the earnings years are when things explode, when it all comes into light that the future isn’t infinite!
Google may be the exception as may be Mircrosoft, the the models always run out of turbo status where they grow about the speed of the economy…or in FB’s case maybe even stall.
Life is great if you can stand it. Investing is addictive because the outcome is intermittently random in most cases. Human being can’t know what the can’t know.
In the meantime eperts who demand to be authorities line up to profess their advantage. Me? I read mungo here because his model is one that works. And I index otherwise; that works too.
Holding a 10 year bond at 2% doesn’t look as bad when compared to holding cash losing 15%/year. Nobody’s forgotten 2000, it’s just that artificially low interest rates combined with high inflation drive higher and higher asset prices.
That 15% annual loss on cash is AFTER inflation. That 2% yield on the 10-year bond is BEFORE inflation. After you adjust for inflation, that 2% 10-year bond yields in the negative double digits.
FB has signaled the issue and we (investors) missed. I even posted here, that Apple’s new security rules are hurting FB, as they cannot target the advertisement. The issue didn’t go away. And this quarter results should have been expected. Also, the META name change should have signaled there is some underlying issues that the company is trying to distract investors from.
