Traders Still Pine For The Dot-Com Boom Days

Angry Bull - Illustration - Stock MarketIf you are talking to somebody who got into investing or trading sometime after the implosion of the first "dot-com" bubble in 2000-2001, it can be hard to fully convey just how crazy things were in the late '90s. If you talk to a trader who has been active in the markets for at least 20 years, their eyes will almost surely glaze over as they talk about the opportunities that presented themselves every day during the "dot-com boom".

Back in 1998-1999, trading the stock market was practically a national obsession. Online brokerages had given people a newfound freedom as they could now make their own trades in their PJs without having to pick up the phone and without having to spend an arm and a leg. The Pattern Day Trader rule (which, I still argue, is one of the most crooked rules around) wasn't in existence yet. Many Americans tuned in to CNBC multiple times per day to see which stock was up 400% on the day and how the latest dot-com IPO had performed.

Stocks would go up 500-1,000% in a day just by mentioning a keyword such as "Microsoft" or "China" or "e-commerce" or even "Internet" in a press release. "Dot-com" IPO would open 50 points above the level that they priced at and finish the day up another 50 points. Analysts would fall over themselves to upgrade Internet stocks even though they privately felt that the companies were garbage and wouldn't last.

The national obsession over trading was kept ablaze by stories of regular, everyday people becoming millionaires almost overnight. "I just buy the latest IPO at the open and sell it at the end of the day for a huge profit." This was actually a viable trading strategy in 1998-1999.

The "Money Honey" Maria Bartiromo and Joe Kernen and Rick Santelli all became household names during the "dot-com boom". As the markets soared, so did their profiles as millions of Americans would tune in to see how the never-ending parabolic move of the markets was holding up.

Etoys. Webvan. Just some of the companies that had much-hyped IPOs in the late '90s, only to burn out a short time later.

Did you know that back in 1999, it was actually frowned upon for Internet companies to make money? Investors would actually assign a discount if a company was actually profitable. Lose as much money as possible, the line of thinking was at the time, as long as revenues were increasing by an exponential amount.

Did you know that back in 1999, people were actually making fun of Warren Buffett for not investing in Internet companies? I don't invest in companies that I don't understand, Buffett said at the time (and still says). You are a dinosaur, many people said, and you are going to get blown out of the water by not putting Berkshire Hathaway's money into the latest dot-com IPOs. After the "dot-com" bubble burst, Buffett and Berkshire Hathaway were still standing and their many businesses were still making real money, while many dot-com companies were relegated to the trash bin of history.


If you ever hear a person talk about how crazy the markets currently are, know that this is NOTHING like the late '90s. That was crazy.

Filed under: General Knowledge

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