Deja Dot.com disaster? | decision point

Today on Fox Business‘Barney & Company, David Bahnsen (Bahnsen Group) was asked if the current market reminded him of the Dot.com bubble. He said yes, but he didn’t do the part about all the worthless dot-com companies that went bankrupt. Large companies like Cisco, Microsoft, and Intel have also experienced parabolic upward moves followed by parabolic collapses, taking years to recover.

During the dot-com bubble, there was a belief that companies with many web pages could make a lot of money. Currently, there is a frenzy caused by unrealistic expectations about AI. Yes, AI will succeed. But no specifics have been confirmed yet, and hints of tulip mania are in the air.

We don’t know how it will ultimately play out, but eventually there will be a bear market and we will see so-called “bulletproof” stocks filled with holes. To show what can happen, let’s take a look at what happened to the stocks of some solid companies during the Dot.com bankruptcy. To be clear, I lived through those times and I can tell you that it looks and feels very similar today. Yes, 9/11 contributed to the decline, but most of the damage occurred before then.

Before the iPhone in 2000, Apple was not the company it is today, but it was a solid company. It then took five years to return to its 2000 high, falling -82%.

Amazon was still a bookstore. It fell -95% and took 10 years to recover.

Cisco was one of the largest companies in 2000, fell -90% and took 22 years to recover.

Intel was another hit at the time. It fell -83% and took 18 years to recover.

If any of these stocks were bulletproof, it was Microsoft. It fell to -67% and took 15 years to recover.

Finally, Oracle fell -85% and took 14 years to recover.

conclusion: We don’t know when or how the inevitable “adjustment” will materialize, but we think it will happen. Because always, always, always. We do not mean to imply that there will be losses similar to those seen in 2000-2002. But there is a history. Will we learn from it?

Learn more about DecisionPoint.com:

Watch the latest episodes. DecisionPoint Trading Room On DP’s YouTube channel here!

Try it for 2 weeks with a trial subscription!

Use coupon code DPTRIAL2 at checkout!

Technical analysis is a windbreaker, not a crystal ball. –Carl Swenlin

(c) Copyright 2024 DecisionPoint.com

disclaimer: This blog is for educational purposes only and should not be construed as financial advice. You should not use any of our ideas and strategies without first evaluating your personal and financial situation or consulting a financial professional. All opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.

DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletter, blog or website materials should not be construed as a recommendation or solicitation to buy or sell any security or to take any action.

Useful DecisionPoint links:

trend model

Price Momentum Oscillator (PMO)

balance volume

Swenlin Trading Oscillators (STO-B and STO-V)

ITBM and ITVM

SCTR Ranking

Bear market rules