ack in the day, when I wore a younger man’s clothes, there was such a thing as the dotcom bubble. Of course, nobody called it that at the time. Almost anyone under 35 in the year 2000 had no memory of living through a bubble in their lifetimes. Sure there was the emerging markets bubble, and the Japanese bubble, but most Americans didn’t participate in those. The last most popular bubble for those born in the 1960s was the gold bubble from the 1970s.
I only remember that one because my grandfather would give me silver dollars at Christmas.
And so it was that the internet bubble was a great phenomenon. It was going to change everything and it did. In retrospect, signs of the top were all over the market.
People talked about stocks every day. CNBC was on all the TV screens when you went out to lunch. Something might have been happening in sports but you wouldn’t know it at the local bars and restaurants during trading hours. People didn’t know what they were buying but if it had “dotcom” after its name they were in.
Old gold miners did reverse mergers and became tech stocks overnight. Ten years later they became uranium miners.
I remember one story where the mailroom guy at a local tech firm was driving a new Mercedes because his company was giving out $5000 bounties if you recommended someone who got hired. He brought in all his friends. It was easy money.
Of course, back then there was this thought that the internet would bring some kind of monetary equality to those who worked at start-ups. I knew several people who got rich simply by working basic jobs at AOL in Northern Virginia. That seems less likely these days.
By March of 2000, the party was over. Lunch TVs were back to sports and no one was talking about their portfolios. They wouldn’t even look at them.
The rise and fall of the Dotcom bubble:
It took 15 years, an entire generation, for the Nasdaq to hit new highs over 5,000. It is now triple that at 17,555. People forget the long grinding bear market in the early 2000s. Tech stocks became so oversold that Amazon (AMZN) was trading around $3 a share (post-split). No one wanted to own one of the greatest companies of the century.
This afternoon the latest market darling Nvidia (NVDA) will announce earnings. The company has a trailing p/e of 75 and a price-to-book of 64.22. Its quarterly earnings growth is a massive 628%. It is a monster company in a hot industry that can’t produce enough chips to meet the tremendous demand.
It doesn’t seem that overvalued given its growth. The question is: can the growth continue?
I don’t own the stock because the chart looks like a triple top and no one has figured out how to monetize AI in a way that shows they will make a lot of money. I could be wrong, I often am, but investing is a game of weighing risks.
What struck me about Nvidia was that I found this ad on the Internet:
They are having an Nvidia earnings watch party. This is the type of stuff that happens at the tops of markets. Like when Bitcoin hit $69,000 and Miami was full of crypto bros paying $25,000 for champaign.
At market bottoms, there are no parties.
I went to a coal conference in Nashville in 2020. Peabody Energy (BTU) was trading at $2.40 a share. Biden was going to shutter the industry. CEOs would get on stage, tell sob stories, and openly wonder if they would be in business in 2021. They would joke, “It must be time to buy as everyone hates coal.” The audience would laugh halfheartedly.
In 2022 BTU hit a high of $33.29. You could have made 1,287% gains in less than two years! I don’t know if NVDA will be up or down tomorrow or next year. But I’ll bet anyone that it won’t be up 1,287% by 2026.
All the best,
Christian DeHaemer
Outsider Club
Donald Trump’s lockup period is ending: https://qz.com/donald-trump-media-stock-holdings-djt-lockup-selloff-1851629076?ICID=ref_fark
https://www.outsiderclub.com/china-stock-reckoning/
https://www.outsiderclub.com/silver-solid-state/
This was from May but gives some context: https://www.kiplinger.com/investing/are-stocks-in-a-bubble-2024
