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The DotCom Crash Revisited 528

Posted by Hemos from the navel-gazing-at-its-finest dept.
woginuk writes "At 9:00pm GMT today , it will be exactly 5 years since the Nasdaq reached its highest level, 5048.62. From there on it has been downhill all the way. Most of us have been affected by it, one way or the other. The Guardian has a story looking back on the moment and succeeding events."
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The DotCom Crash Revisited More

The DotCom Crash Revisited

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  • Real Estate Bubble - Stock Bubble (Score:4, Insightful)

    by SpaceCadetTrav ( 641261 ) on Friday March 11, 2005 @12:31PM (#11911013) Homepage
    The rampant speculation has moved right into real estate. Prepare for the next great crash, with greater consequences.
    • at least real estate exists rather than promises of technology.

      • Re:Real Estate Bubble - Stock Bubble (Score:5, Insightful)

        by cmowire ( 254489 ) on Friday March 11, 2005 @01:22PM (#11911649) Homepage
        No, it's the exact same thing.

        If you buy stock in... say... Google, there's a certain intrinsic value because, if they were to liquidate, they'd have their racks of hardware, their office space, etc. There's money to be hand to buy up the patents and trademarks and everything else...

        Much the same way as there's a certain intrinsic value in real estate. You need to remember that part of real estate is all about location, which is not intrinsic.

        In both cases, the price you pay is the intrinsic value of the item, plus all of the abstract hard-to-quantify stuff. If all of the tech firms moved out of Silicon Valley, there would be a lot less demand for land in the area, for example. The value of the property goes down, even though "they aren't making more land".

        • Re:Real Estate Bubble - Stock Bubble (Score:5, Insightful)

          by badasscat ( 563442 ) <basscadet75@@@yahoo...com> on Friday March 11, 2005 @01:47PM (#11911972)
          Much the same way as there's a certain intrinsic value in real estate. You need to remember that part of real estate is all about location, which is not intrinsic.

          Uh, last I checked, you buy a property in Manhattan, whatever happens to the real estate market, your property is still in Manhattan.

          Location is intrinsic. The value of that location is not intrinsic, but that value itself is linked to intrinsic, er, properties (for lack of a better word). For example, New York was built where it is because it is on top of one of the greatest natural harbors in the world. That is never going to change, so the value of a particular property in New York will likely not fluctuate all that wildly - it does have a certain intrinsic value based on physical properties of the location that will never be altered.

          Beyond that, I just don't think there is any comparison between real estate and stocks. When you buy a stock you are buying a piece of paper - you're no longer even buying the promise of dividends (which is why people used to buy stock), because most technology companies have chosen to forego dividends and instead reinvest that money into company growth. The unspoken expectation between company and investor is that eventually there will be a dividend payout and all that investing will have counted for something, but this expectation was sort of turned on its ear during the dot-com bubble and people started investing instead with nothing but the expectation that the stock would go up. They had no idea why they were actually doing it; it was not based on anything.

          Then we had the crash, which knocked some sense back into these people. Those who argued that you buy stock based on company fundamentals and not speculation were vindicated. Something similar could happen in real estate, but never on that scale because after all, when you buy real estate you are buying a tangible asset, not a piece of paper that is already priced based on the expected position of the company five, ten, even twenty years in the future.

          In both cases, the price you pay is the intrinsic value of the item, plus all of the abstract hard-to-quantify stuff.

          This is not at all true. When you buy stock you are not paying for the intrinsic value of anything. You are paying for the expected future intrinsic value of a company, based on its P/E ratio.

          To make stocks and real estate equivalent, a seller of a home or a piece of land would have to say to you "this home may only be worth $300,000, but I am going to charge you $2.4 million because that is what I believe it will be worth 20 years from now." Obviously, nobody buys real estate like this, but it is exactly the way people buy stocks. Stocks have a certain level of inherent speculation (even if you're buying "value" stocks, the P/E ratios are rarely less than 8 or so... with tech stocks they're usually more like 60 or 70), whereas real estate is always sold for what it's valued at today.

          So the prices of real estate can go up and down, but because there is little speculation involved (unless you're buying undeveloped land in the hope that it will eventually be developed), there is little risk of a sharp downturn. That's as true now as it ever was. I mean, people have been saying for 100 years that real estate is overpriced, but how much do you think an average home built in 1900 costs today compared to what it cost at that time? Real estate prices will only continue to rise over time because there are only so many places to live in this country and a lot more people both being born and moving in every day.

          Stock prices are really anybody's guess. They've trended upwards over time just as real estate has, but they've always been subject to severe corrections, bubbles and overall fluctuations than real estate has.
    • The rampant speculation has moved right into real estate. Prepare for the next great crash, with greater consequences.

      I agree with you on that. But it's been a long time coming. I'm ready to buy, but I've been waiting for the bottom to drop out so I can swoop in. No luck yet. :(

      • I'm dying to sell since my house has appreciated so much since I bought, the problem is I still have to live somewhere.
        • I'm dying to sell since my house has appreciated so much since I bought, the problem is I still have to live somewhere.
          Renting will save you money [curbed.com] (and provide a place for you to live).

          • Re:Real Estate Bubble - Stock Bubble (Score:4, Informative)

            by futuresheep ( 531366 ) on Friday March 11, 2005 @01:43PM (#11911905) Journal
            Only in the short term. If your house appreciates at a rate greater than inflation, you win out by owning in the long run. If we put inflation at 4%, then within 9-10 years you'll be paying more to rent that house or apartment, then someone who's been paying down a mortgage on an equivilant property for 10 years. Add on to that the money that the homeowner will earn upon sale of their property in 30 years, and renters really lose out.

            Let's use these numbers:

            Rent information

            1,100.00 Monthly Rent
            15.00 Monthly Insurance
            4.00 Annual rent increase

            Home Purchase

            222,000.00 Home Value

            2,220.00 Annual Taxes
            1,110.00 Annual Hazard Insurance
            1,332.00 Annual Maintanance
            5.00 Appreciation

            Financial Info

            185,000.00 Loan Amount
            6.000 Interest Rate
            30.00 Length of Loan
            1.000 Loan Points
            2,000.00 Closing cost
            30.00 Years before sell
            6.000 Selling cost
            3.000 Annual savings rate
            28.000 Your tax rate
            Joint Filing Status

            At the end of 30 years, here's how the numbers work out:

            Rent Analysis
            Years to Rent: 30.00
            Average rent: 2,084.49
            Total Rent and Insurance: 750,416.47

            Home Ownership Analysis
            Mortgage Payments: 399,300.65
            Taxes and Insurance: 99,900.00
            Maintenance: 39,960.00
            Tax Savings: 126,462.18
            Ownership Investment: 383,902.83

            Rent vs Buy Analysis
            Monthly Mortgage Payment (PI): 1,109.17
            House Appreciation Value: 959,471.21
            Proceeds Minus Costs: 901,902.93
            Loan Balance: -0.00
            Equity Appreciation: 864,902.93

            So the renter will pay approximately 366513.64 more to have a place to live, and miss out on 478,000 in acutal profit. Enjoy renting.

            • Your calculations are incorrect (Score:4, Insightful)

              by Gzip Christ ( 683175 ) on Friday March 11, 2005 @02:45PM (#11912768) Homepage
              Your analysis only factored in closing costs and other costs associated with a singe purchase/sale. Given that the average time for owning a home in the US is 7 years and that your post deeper in this thread assumes that you will always buy a new home when you sell, you need to go back and re-run your numbers with 4 sales and 5 purchases. That's more than $39K that you need to spend on transaction costs - it would actually be substantially more if you buy a more expensive house each time, as you say you are doing.

              Furthermore, you are totally ignoring the opportunity cost of investing in a house. It looks like you are assuming a $37K down payment. If you rent for those 30 years, you could apply that $37K to some other investment. Let's say you invest in an index fund in order to avoid taxes until you sell. At an average annual return of 11% [finfacts.com], you will have $847K at the end of 30 years, and that's just from saving the down payment! If you are paying more on your mortgage and expenses than you would be on rent for an equivalent place, then you also need to consider the opportunity cost of that money as if you had invested it in something with an optimal return. It will easily beat out the equity appreciation of $864K that you listed, and that is even before you factor in the multiple transaction costs that you left out.

              All of this is using your questionable assumption that your equity appreciation will out pace inflation. Even so, renting is a pretty good deal. However, if your home appreciates at less than inflation, the numbers get much, much worse for owning. Historically low interest rates have allowed people to pay more for homes that they could in the past, but now that the Fed is returning interest rates to a neutral level at a measured pace, people are already unable to secure the same magnitude of loans they could not too long ago. Every single indicator points to prices being overinflated (which a fall in prices would resolve): historically low interest rates, historically high P/E ratios (purchase/rent), historically low savings, percent increase in median income falling (way) short of percent increase in median house prices, first time buyers priced out of the market, etc.

    • On one hand this would be a good thing since when the prices collapse, or come down significantly from where they are now, people like myself will be able to buy a decent home at a resonable price.

      Further, since the prices will be lower than they are now, there will be those who will buy these properties at, relatively speaking, bargain prices, fix them up and then resell them for profit.

      Capitalism at its best. Buy low, sell high.

      To see some of the stories you've been missing, see my Journal.

      • Re:Real Estate Bubble - Stock Bubble (Score:5, Insightful)

        by ZoneGray ( 168419 ) on Friday March 11, 2005 @01:26PM (#11911705) Homepage
        We had a real estate crash in 1991 and it sucked, even if you didn't own real estate.

        Don't hold your breath waiting for housing prices to drop more than a couple percent, anyway. And even then, mortgage rates would be high, so it would be difficult to take advantage.

        The key to success in real estate is simple: Buy Young.

        Buy a house as soon as you can manage it, put down as little as you can, get as big a mortgage as your paycheck can handle, and buy in the nicest part of town that you can afford. It can be a financial load at first, but as the years go by, it gets easier and easier; your mortgage payments are fixed as your income increases (even if you just make inflationary raises, after 20 years those mortgage payments become relatively small). And the mortgage interest deduction is one of the great ripoffs of all time, you might as well take advantage of it.

        I didn't buy young, to my eternal regret. I remember 20 years ago thinking, "$50,000? I could never pay that off." But if I had bought, I'd be living in a $400K house paying about $250/month for a mortgage.

        • Re:Real Estate Bubble - Stock Bubble (Score:4, Interesting)

          by yppiz ( 574466 ) on Friday March 11, 2005 @02:03PM (#11912185) Homepage
          The parent post says:
          The key to success in real estate is simple: Buy Young. Buy a house as soon as you can manage it, put down as little as you can, get as big a mortgage as your paycheck can handle, and buy in the nicest part of town that you can afford

          This is not good financial advice. You are right, that an investor should start early to see the most gain (due to compounding). However, what you are advising is that someone go into more debt than they need to, "get as big a mortgage as your paycheck can afford," in order to invest.

          For many years, this young investor will be paying someone else -- the bank -- rather than paying themselves. At the same time, the investor will has taken on a great financial burden, "[as much] as your paycheck can afford." Having put themselves into a bad position (they don't have much cash), they are now much more likely to fall into bankruptcy. Why? Because now they are more likely to have a cash crunch.

          Further, all of this investor's eggs are in one basket. If their local real estate market turns sour, in particular at a time when they have to move, then they're in trouble.

          I would advise the following. 1) start young. 2) take on as little debt as possible, as debt has a negative 5%-8% rate of return, and 3) diversify your investments to maximize your return over the long-term while minimizing short-term downturns.

          --Pat / zippy@cs.brandeis.edu

          • Wrong. (Score:5, Insightful)

            by brunes69 ( 86786 ) <[slashdot] [at] [keirstead.org]> on Friday March 11, 2005 @03:00PM (#11912937)
            A mortgage is basically the best 'debt' you will ever have in your life. It is not like other debt because of two simple facts:

            - It is remarkably low interest (below prime rate right now with many banks)

            - The interest itself is tax-deductable, at least in the US.

            On top of this, the alternative - paying rent - is markedly worse. You are basically flushing money down the toilet, with a 0% return.

            The parent was indeed giving good advice. Your advice, however, is not prudent. Every year you delay getting a mortgage, is a full year of rent you could have been using to pay down one. Even if the interest rate on the mortgage was 15% or 20% (which it isn't), and even if there was no tax deduction (which there is), it would still be in your interest to get a mortgage.

            • Re:Wrong. (Score:4, Interesting)

              by mr.capaneus ( 582891 ) on Friday March 11, 2005 @03:17PM (#11913126)
              What you are advising is paying massive amounts of interest and taxes on the hope that it will be made up for by appreciation. This is a much bigger gamble than investing in the stock market and renting. A lot of it depends on the area you live in and the rent/ vs. purchase price of homes but buying an expensive house is not a good investment ever. Also, I can think of something even better than that awesome tax deduction you get for mortgage interest ... not paying that interest in the first place.

          • Re:Real Estate Bubble - Stock Bubble (Score:4, Insightful)

            by ZoneGray ( 168419 ) on Friday March 11, 2005 @05:38PM (#11914600) Homepage
            It's possible to lose a little money in the short run by buying a home. But over 10 years or more, you'll always come out ahead. However, it's important to buy wisely, and I should have emphasized that.

            My rule of thumb is that you want to look for a place where the highest portion of the value comes from the land rather than the structure. The land is what goes up in price, the structure actually devalues over time. A $100K house on a $200K lot is a safer investment than a $200K house on a $100K lot. And both are safer investments than a $300K condo.

            This is really just a variation on the old principle of, "Location, Location, Location."

            Condos do sort of scare me, I heard recently that 60% of new Florida condos are being bought by investors. That's a sign of a speculative bubble. But single family homes aren't quite as susceptible to that stuff.

            Mortgages are simply a great deal, effectively you can pay 3-4% interest, and homes will always beat that over the long term.

    • Re:Real Estate Bubble - Stock Bubble (Score:5, Informative)

      by winkydink ( 650484 ) * <sv.dude@gmail.com> on Friday March 11, 2005 @12:38PM (#11911101) Homepage Journal
      Well, I moved to Silicon Valley in 1983. Back then everybody talked about how expensive houses were (a nice house was in the high 100-low 200k) and how overpriced the real estate market was. Save for a minor dip in the 90's housing prices have never fallen in 22 years. The median price in Santa Clara County (not where Larry Ellison & Steve Jobs live... where regular folks live) is $615k.
      • you call the period from 86-88 a "minor blip" ???

        wow.

      • Re:Real Estate Bubble - Stock Bubble (Score:5, Insightful)

        by Edward Faulkner ( 664260 ) <ef@NospaM.alum.mit.edu> on Friday March 11, 2005 @01:22PM (#11911654)
        Save for a minor dip in the 90's housing prices have never fallen in 22 years.

        That's precisely the kind of thinking that makes crashes possible. When everyone believes something is a safe bet, they discount risk more and more. Market phenomena often work themselves out over decades, which is beyond most people's attention span.

        Take stocks for example. From 1980 to 2001, stocks were the right place to be. When a trend lasts that long, it changes people's attitudes. In 1980, most people were very nervous about stocks, because they had spent the previous couple decades sucking.

        If you bought the Dow Jones in 1929, you had to wait until 1956 just to break even. And this isn't such a rare outlier. If you bought in 1966, you didn't break even until 1983. Once you include taxes and fees, it was more like the early 90s.

        It takes a while for attitudes to shift. Despite the bubble popping, lots of people still believe that their 401k is going to grow at 7-10% per year. That's not necessarily true anymore.

        America's economic fundamentals are troubling. We actually spend 5% more than we make. With no domestic savings to fund future growth (or even service our existing debts), we're dependent on foreign investors. And the foreign investors are getting very nervous as the dollar continues to slide.

        • Dow Jones (Score:3, Insightful)

          by ChrisMaple ( 607946 )
          The Dow Jones (Industrial Average) consists of stocks that, on average, pay more dividends than the general market. The index does not reflect accumulated interest payments. On the other hand, it doesn't include "inflation" (loss of purchasing power) either.
      • A housing bubble is pretty easy to recognise.

        You might be seeing a housing bubble if

        it's significantly cheaper to rent than buy,

        if people are saying that you can't possibly lose money,

        if the cost of ordinary housing is beyond the reach of ordinary folks, even with two wage earners.

        I think that California qualifies on those last two counts, at least. How is the rental situation? Is rent cheaper than mortgage payments for a comparable accomodation? If so, this might be a great time to sell your hou

    • I'm not sure you can equate the two. Real estate is a limited commodity. Tacking "on the internet" to a crappy business plan is not a limited commodity.

      There was a "market crash" in real estate in the early nineties. However, within a few years, prices had exceeded their previous peak. People did get hurt in the crash, no doubt, but those that were able to hang in there saw their investments pay off.
    • The rampant speculation has moved right into real estate. Prepare for the next great crash, with greater consequences.

      Note that the real estate bubble is not limited to the United States. In many of the developed (and developing) countries around the world, real estate is significantly overpriced. See this article [morganstanley.com].

    • Tulipomania (Score:3, Insightful)

      by jamrock ( 863246 )

      Even before the burst of the "Tech Bubble", my eldest brother, who owns a Canadian mutual fund company, was comparing it to the "Tulip Bubble", which brought down the Dutch economy in 1637 [wikipedia.org]. The obvious similarity between the two was rampant speculation brought on by greed and clouded judgement.

      Or as it was nicely put by a judge who ruled that four leading investment banks were not to blame for stock market losses following the collapse of the tech bubble [analysts from Merrill Lynch, Goldman Sachs, Morgan

  • Hysterical? (Score:5, Interesting)

    by Onimaru ( 773331 ) * on Friday March 11, 2005 @12:31PM (#11911018)
    Rob Hersov, then boss of Sportal - now vice-chairman of executive plane company NetJets - says the collapse was precipitated by nothing less than "mass market hysteria".

    Well, that's a little bit strong, don't you think? The .com collapse was really tragic, but it was far from unpredictable, hysterical, or preventable. Just basic macro economics -- when there are economic profits [cornell.edu] (not just accounting profits) in a market then entrance is encouraged, and when these profits dry up then the market participants take a while to come back down to equilibrium, just likePavlov's [wikipedia.org] dogs took a good while to stop salivating when the dinner bell was rung.

    I more agreed with Julie:

    Julie Meyer, co-founder of First Tuesday, puts it this way: "It's not that I didn't think it was coming. It was that you never see the shape of things until it happens."

    Boy, how true did that turn out to be?

    • "The .com collapse was really tragic, but it was far from unpredictable, hysterical, or preventable"

      I don't think he's saying it was unpredictable, hysterical, or preventable." He's simply stating (at least in that sentence) that it was precipitated by hysteria.

      And while, yes, it's a function of macro economics, the scale of the rise and fall was certainly grounded in hysteria as people rushed in with *huge* capital expenditures with little understanding of how those expenditures would result in real pro

    • Re:Hysterical? (Score:3, Informative)

      by Ohreally_factor ( 593551 )
      Well, the rise before the fall was characterized as irrational exuberance by none other than Alan Greenspan.

      Another thing is that, day to day, the stock market is governed by emotions. It just happens that the emotions are Greed and Fear. And Greed is the positive emotion. =) And of course it's greed that drives the "Greater Fool" strategy of investment.

      Over the long term, the markets tend to be rational and efficient. Not over the short term, however.

  • Everyone was guilty of hubris at the time (Score:5, Insightful)

    by filmmaker ( 850359 ) * on Friday March 11, 2005 @12:31PM (#11911023) Homepage
    There is a quote in that article by Rob Hersov that describes the way a lot of people felt at that time:

    "Those were incredibly heady days," he says. "Fun - absolutely. We thought we were making a difference. We thought we were getting out there, shaking things up, doing something no one had done before. We really were pioneers - buccaneers."

    That statement demonstrates the two truths of the dot com explosion: on one had, we really did make a difference - we built a huge IT infrastructure in, essentially, the blink of an eye. On the other hand, that statement is packed with the hubris and exaggerated sense of importance that also permeated the time.

    The analogy was often made in 2000/2001 of the Detroit auto industry and the development of the US national highway system. The same thing happened with scores (or maybe it was hundreds?) of companies popping up with the word "motors" in their name during the period. And now there are 3; the big 3 left in Detroit.

    Not only that, but barring e-Bay and a few other notables, the companies that made it out of the bubble are ones with unique brand names: Google, Amazon, Travelocity, Yahoo!, and GoDaddy.

    I also disagree with the apparent conclusion that there are no lone wolves anymore. The climate is better for a savvy lone wolf than it was even in 1997, I believe.

    Who came up with the e-Idea of e-Appending e-E to e-Everything anyway?

  • It wasn't THE END (Score:5, Informative)

    by winkydink ( 650484 ) * <sv.dude@gmail.com> on Friday March 11, 2005 @12:33PM (#11911040) Homepage Journal
    only the End of the Beginning. Startups continue to get funded although they now have to have some reasonable idea of how they will actually make money. There was a report on the San Francisco public radio station yesterday that said that if you look at growth in Silicon Vally over the last 20 years and "flatten" (whatever that means) the growth around the bubble, Silicon Valley continues to grow at relatively the same pace as before.

    • Re:It wasn't THE END (Score:3, Informative)

      by rdc_uk ( 792215 )
      "if you look at growth in Silicon Vally over the last 20 years and "flatten" (whatever that means)"

      It means that if you look at a graph of growth, there will be a spike in it for the bubble.

      If you take the start level of the spike, and the level to which it drops at the tail of the spike, and interpolate a line between those two levels, the overall growth rate remains the same.

      i.e. the bubble was, in fact, a spike; it went up, it went down; everything else grew at the same rate.

      This is in fact the most

    • Re:It wasn't THE END (Score:2, Interesting)

      by nelsonal ( 549144 )
      Imagine a sloping line with a big n shaped curve in the middle. If you exclude the n curve in the middle of the line you returned to the same growth cuvrve you were on originally. That is what they meant by flatten the growth around the bubble. A similar example is here [yahoo.com] notice that the slope (its a curve on a non-log chart) is pretty constant from 1980-2005, if you drew a line from 1995-2003.

  • in that case (Score:2, Interesting)

    by Anonymous Coward
    this time 5 years ago today i must have been still asleep. not rushing around to get ready for work and dreading the day. i'd have been slowly waking up in about half an hour, ready for a day of coding interesting projects, playing a little basketball, having a beer. it's not the money i miss, it's the freedom.

  • What the Bubble Got Right (Score:5, Interesting)

    by semaj ( 172655 ) on Friday March 11, 2005 @12:37PM (#11911088) Journal
    Paul Graham has an interesting essay on "What the Bubble Got Right" [paulgraham.com]. It's worth remembering that some of the companies that lost 90% of their value are still worth billions today - e.g. Yahoo.

    Looks like the server's smoking already - you can at least get the text from Google's cache [64.233.183.104].

  • Looking back (Score:5, Interesting)

    by gtrubetskoy ( 734033 ) * on Friday March 11, 2005 @12:37PM (#11911093)

    I remember there was a pretty interesting comparison to the railroad boom and bust posted here a couple of years back, unfortunately I couldn't find a link to it. I think the railroad boom came in two waves, the second boom started about 5 years after the first and was much larger, and the bust was more devastating too. So we could be in for another bubble soon.

    Also, here is an interesting read [overclockers.com]. I don't see the date on the article, but the wayback machine has it on Mar 2001, so it was probably written right at the peak.

  • Woo hoo (Score:3, Funny)

    by UES ( 655257 ) on Friday March 11, 2005 @12:38PM (#11911104)
    Come on, just for old times' same, won't someone please give me $50MM to start my online Post-It sales portal, www.yellowsquare.com?

    We give away the Post-its, so we can GET BIG FAST.
  • From Fast Company Now [fastcompany.com]:


    Is there anything to these rumors of a Silicon Valley resurrection? Or has my week simply been filled with coincidences? What's going on?


    Since that's from a blog... is it about the business of blogging? Are blogs the new dotcoms?

  • At 9:00pm GMT today (Score:3, Insightful)

    by bill_mcgonigle ( 4333 ) * on Friday March 11, 2005 @12:39PM (#11911111) Homepage Journal
    Which is 16:00 in the timezone that the NASDAQ uses.

    So, half an hour before the closing bell. Maybe CNBC will go black for a minute, in memoriam.

  • Just for fun (Score:5, Insightful)

    by hackstraw ( 262471 ) * on Friday March 11, 2005 @12:41PM (#11911138)
    Read about the California Gold Rush [wikipedia.org], and mentally timeshift the dates and where appropriate substitute gold oriented things with computers.

    The biggest difference between the two is that California was not settled at the time and it was most difficult to get basic necessities. Otherwise, same shit different day. People think they can get something for nothing.

    • Re:Just for fun (Score:2, Insightful)

      by cot ( 87677 )
      Yeah, unfortunately I was in school at the time. I actually had thoughts about stopping out and trying to make a quick buck while I could, realizing that the atmosphere wasn't going to last forever. Like they say, you make money during a gold rush by selling shovels (or something like that).
    • Heh, note that most(note NOT all) of the people who trully did get rich from the gold rush were the people who actually sold the supplies to speculators, not the gold rushers themselves...

  • Not all stocks crashed (Score:5, Interesting)

    by ites ( 600337 ) on Friday March 11, 2005 @12:42PM (#11911153) Journal
    Look at Apple's stock price over 5 years [nasdaq.com], for instance - it's higher now than it was at its peak in 2000.

  • Downhill all the way? (Score:5, Insightful)

    by Zocalo ( 252965 ) on Friday March 11, 2005 @12:45PM (#11911196) Homepage
    I don't know about that; more like finding its proper level again. Take a look at a comparison [yahoo.com] between the NASDAQ (^IXIC) and the Dow Jones (^DJI) and you'll see what I mean.

  • Wrong Date (Score:2, Informative)

    by finnhart ( 653695 )
    Yo, read the article. Yesterday marked the anniversary of the high, not today. Easy for me to remember, b/c 10 March is my birthday.

  • A day late... (Score:5, Insightful)

    by Gzip Christ ( 683175 ) on Friday March 11, 2005 @12:48PM (#11911225) Homepage
    No, it was March 10th, 2000 when the NASDAQ peaked. Was this story submitted yesterday and the editors didn't bother to update the reference to the anniversary being today? The anniversary was yesterday.
  • Before and after the DotCom Bubble Bursting I was working at a large law firm in Silicon Valley. Prior to the bubble, the corporate lawyers in our office were frantic with work. We were turning away work left and right while the litigators (whom I supported) were calm. Even before the Bubble went *POP* that dynamic was changing. We had less corporate work (fewer deals and IPOs) and the number of upset business folks were starting to make our litigators hop.

    At the time I thought it would be humorous to do my own IPO calld $2Bob.com*. There would be no business plan save that all of the money invested would be spent. The IPO sheet would also specifically state that investors should expect no return on their investment and that all of the money would be pissed away on quasi corporate frivolities. If I had been a corporate paralegal instead of a litigation paralegal I might have actually tried it;-)

    *The fact that "$" is invalid for a web address made it all the more entertaining to my young self;-)

  • that the current level is up 85% in 2.5 years (since the "bottom" of about 1114). Despite the precipitous fall, if you were in at the "bottom", you've recovered fairly well.

    Of course, it's fun to realize that if you lose 80% of your investment, you have to manage a gain of 400% to get back to even. I'd say the corporations were paying for legislation that made it so hard for small investors to break even :-)

    (That's a joke, by the way; there's a smiley at the end.)

  • What the Bubble Got Right (Score:3, Interesting)

    by smug_lisp_weenie ( 824771 ) * <cbarski.4503440@bloglines.com> on Friday March 11, 2005 @12:53PM (#11911295) Homepage
    Paul Graham's essay on the legacy of the dotcom boom/bust is a great read. It tries to tease out what worked and didn't work during the boom and how to carry through the positive elements of the tech explosion into the future: What the Bubble Got Right [paulgraham.com]

  • Tech needs tech people (Score:5, Interesting)

    by Lysol ( 11150 ) on Friday March 11, 2005 @12:53PM (#11911296)
    I have to say, after reading this article and Paul Grahm's [slashdot.org] I have to agree that if you're going to start a tech company - which almost any net company is - then you need tech people.

    When we (my partners and I) merged our startup with another leader in our industry, everything at first was rosy. But within a matter of months, the misunderstanding of not just our business but also our tech, ended up being responsible for everyone running for the door. I, the principal technology guy, was out the door in six months. And needless to say, our product was dropped from their system within a year. Today? The VC's pushed everyone out and the company assets and name were transferred (from San Francisco) to east coast ownership.

    Not to say I and many friends didn't have a good time during the days. In fact, when I headed off to a tech consulting company after the startup, I and my co-workers probably spent more time at parties than at the office. But, would I do that again? Probably not. While I'm still fond of the fast paced energy that was was it was back then, I look at ideas like Boo (jesus, esp those guys), Pets, and others of the time and think "ugh."

    But I'm still hopeful for business on the net only because it has such a global reach now. One of my partners and myself are at round two of our startup lives. We're targeting the same industry, but with completely different tools. And one noticable difference is we're seeking no funding at all - which is good and bad. Like Graham suggests, we're goin lean all the way and tech guys are running the show. However, after almost a year of development on my part, it's starting to wear and the mantra now is persistence.

    Everyone has their own story and unlike some I've come across, I'm glad the .com happened - I had a good time. I was probably one of the only ones who never got around to investing in it (in fact, I told companies I worked for I'd rather have cash over stock) so I didn't really lose anything. However, it was a pretty silly time and unless you had a really good idea with some good people behind it, then you probably deserved to fail. Asking if it'll ever happen again is like asking if the gold rush of the 1800's will ever happen again.
  • I remember boo.com. The chiefs of that startup were hyping it quite a lot even by the standards of the roaring nineties. They had zero market testing and had people building 3D virtualizations of clothing and clubwear by hand. They were burning lots of money very very fast and the chiefs were roundtripping from Scandinavia to London and NYC every odd day and doing nothing much more than partying with VIPs.
    I generally was very upbeat at the time but even then thought that boo.com was doing some insane stunts and cutting it to thin for my taste. They were the first ones to incinerate on reentry afer their high-fly and they very well deseved to be the first. BTW: Their sad and sorry remains still exist. [boo.com]
    I do still think the original concept would work. It just can't work the way they aproached it.

  • If (Score:4, Funny)

    by smittyoneeach ( 243267 ) * on Friday March 11, 2005 @12:54PM (#11911306) Homepage Journal
    your financial tree falls in the forest,
    and you're too broke to hear it
    did the money really exist?
  • The perspective seems to be British. He completely ignores some of major dot.coms like CMGI that rode the crest up and crashed hard. Instead, he focuses on some smaller companies that I never even heard of, before or since. And what about MicroStrategy's role? I'm lost several hundred thousand dollars in possible gains. I remember those days very well.

  • Isn't Over Yet (Score:5, Insightful)

    by mslinux ( 570958 ) on Friday March 11, 2005 @12:57PM (#11911343)
    Home prices have yet to crash. Everyone keeps talking about how we had a 'soft landing'... it was soft because of low interest rates that have allowed people who really can't afford housing to get into the game. Wait until the housing bubble pops. Then, we'll get what we should have got when techs crashed... it's gonna be painful, real painful. All one needs to do is read a bit of history to understand how insane real estate prices in America have become. American debt is at an all-time high. We owe way too much money. Home prices have been going up by 20 and 30% annually in many areas... pay checks haven't... is it just me, or do others find this odd?
  • When I read that Intel had gotten locked into a binding agrement with Rambus I knew the end was neigh. I couldn't understand why a multi-billion dollar company would get worked by a bunch of IP pirates. Knowing and acting are unfortunatly very different things.

  • economics (Score:5, Interesting)

    by br00tus ( 528477 ) on Friday March 11, 2005 @01:06PM (#11911440)
    Prior to the dot-com crash, I was mostly interested in fundamental equity analysis, or stock pricing. Since the crash I have become more interested in what used to be called political economy, or economics. In fundamental stock analysis, the intrusion of economics into basic equities analysis is mostly through the p/e ratio or price/earnings ratio. The common wisdom is that riskier stocks had a higher p/e ratio than safer stocks like utilities, but also had more potential for earnings growth. Of course, by March 11th, 2005, many companies were not only within the risk range of high p/e ratios, but had no earnings at all. I was expecting a crash, so I broke even on the stock market, selling half of my stocks when my stocks went down to double what they had been when I bought them, pulling out my original investment. Of course, the other half went to zero, or near it anyway. What I did not predict is how long IT would enter a doldrums, which made me more interested in economics.

    It is often said that people who risk money by buying a stock deserve the dividends they get by the risk they taking buying the stock. This is kind of tautological within the economic system however. The economic system consists of corporations producing commodities (PCs, bread, a colocation rack) and exchanging them for other commodities - a few decades ago money backed by gold, nowadays money which is theoretically worth something because one can pay taxes with it. Corporations often produce commodities which no one wants, which is the main risk of capital investment, it's a loss. Virtually everyone recognizes this as true, from former GE CEO Jack Welch to socialists like Paul Sweezy. Thus, the economic system commits the error of misplacing resources. This error produces capital risk, and this capital risk is the common explanation of why people deserve dividends from capital investment, instead of, say, the workers at the corporation who created that wealth.

    As far as the US economy, productivity was extremely poor throughout the 1930's, then from the mid 1940's to the mid 1960's were 20 years of enormous productivity. It began slowing down in the mid 1960's, and by the early 1970's everyone realized there was an enormous problem. Nixon went off the gold standard, imposed wage and price controls, and dismantled the Bretton Woods system. Productivity has been pretty poor since the mid-1960s, there have been arguments of whether it had a decent bump in the late 1990s or not. The late 1990s bump is obviously from the Internet, an R&D project the US government poured billions of dollars into from the 1960s until the mid 1990s, it was a state project (DARPAnet/NSFnet) handed over the corporations when it had been developed after 25 years of taxpayer funding. Anyhow, this long slowdown in economic productivity in the US has resulted in the average inflation-adjusted hourly wage in the US being below what it was 30 years before. Asia seems to be the only area with decent productivity growth in thw world, but that creates another problem of who is going to buy all of the commodities China is pumping out since the market is already saturated.

  • Looked pretty obvious to me (Score:3, Insightful)

    by samael ( 12612 ) <Andrew@Ducker.org.uk> on Friday March 11, 2005 @01:09PM (#11911484) Homepage
    It was a classic bubble - when it got to the stage that companies were seeing their share price go up for adding ".com" onto the end it was ridiculous. When people at work told me their families and friends were investing in the stock market by blindly following tips on a weekly tech-stocks sheet I knew the end was just around the corner.

    What amazed me was that it then went on to last another 9 months _after_ that point. I guess irrational exuberance can take you a long way before you realise that buying your cat food online and having it freighted to you isn't actually terribly efficient.

  • Seeing the effects right now (Score:3, Interesting)

    by Gaewyn L Knight ( 16566 ) <vaewyn AT wwwrogue DOT com> on Friday March 11, 2005 @01:18PM (#11911599) Homepage Journal
    In San Jose for VON conference and wow... hundreds of buildings with 'For lease/Sale' or 'Office space available' signs out front.

    The swanky office buildings now have such occupants as 'Bad Boys Bail Bonds' (no I am not making this up).

    For the heart of silicon valley the .com burst is still a very present thing.

  • Downhill all the way? (Score:3, Insightful)

    by Idarubicin ( 579475 ) on Friday March 11, 2005 @01:18PM (#11911602) Journal
    At 9:00pm GMT today , it will be exactly 5 years since the Nasdaq reached its highest level, 5048.62. From there on it has been downhill all the way. [emphasis added]

    Well, no. Looking at the five-year chart [yahoo.com] would seem to suggest it was slowly downhill until the third quarter of 2002, followed by partial recovery through 2003, and a relatively stable index in 2004....

    There's an argument to be made that it's been stagnant for a year, but the Dow has been the same way [yahoo.com].

  • Gratis (Score:3, Interesting)

    by Doc Ruby ( 173196 ) on Friday March 11, 2005 @01:27PM (#11911720) Homepage Journal
    Thank you, lying analysts, corrupt accountants, inane journalists, credulous Baby Boomers, BS'ing Alan Greenspan, and all the other "this one can go on forever, without profits" people who made the Bubble inevitably Pop. Well, thanks for the bubble, anyway - in which I made a fortune in cash selling shovels (SW development) at the Gold Rush. No thanks for the abject dereliction of your professional responsibilities in mismanaging that huge creation of value into an unsustainable ticking timebomb. But thanks for being so obviously full of it that I didn't waste a single penny of my money in the markets, or anything connected to it. It's been a long 5 years living with your gifts to the world, after a short 5 years wallowing in the opportunity, and we're just getting started. Prosperity is just around the corner, right?

  • Not done crashing (Score:3, Interesting)

    by bigberk ( 547360 ) <bigberk@users.pc9.org> on Friday March 11, 2005 @01:38PM (#11911839)
    Um, I hate to bring bad news, but the markets are not done crashing yet. Why? Above all else, historically low interest rates which have fuelled debt driven America. The "growth" we've seen is artificial and definitely NOT sustainable. Consumers borrow all their money; mortgages, credit cards, car loans. The underlying rates are guaranteed to rise over the next few years -- your payments on your car loan will rise, mortgage payments will rise. And the government is changing laws (fresh news!) to make sure you can't escape debt through bankruptcy [yahoo.com]

    And that's just the consumer side. Businesses are equally screwed. Look at the balance sheet for all the banks and financial companies. They are heavily debt financed, because money has been so cheap to borrow. The banks can not keep this up, so expect many of America's major financial institutions to falter or even crash.

    As others have pointed out, there is a major problem with real estate evaluation. Across the board, everyone is overvaluing their assets these days. Consumers think their houses are worth way more than they are. Financial companies think their mortgage backed securities are worth more than they are. Banks keep fibbing about the asset value from their derivative investment strategies. It's NOT a pretty picture. Also remember that foreign investment is rapidly leaving the US, the dollar is plummeting (foreigners are smart enough to not invest in the US). etc. etc.

  • Documentaries of the tech bubble (Score:5, Informative)

    by wormbin ( 537051 ) on Friday March 11, 2005 @02:15PM (#11912344)

    If any of you want to remember the crazy days of the tech bubble check out the documentaries Startup.com [imdb.com] and e-dreams [imdb.com].

    I still remember being somewhat tech savy, going to investors conferences and "not getting" how these companies that would never make significant money were commanding these valuations. It was like being in some sci-fi movie where everyone has been replaced by pod people.

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