By Tama Churchouse
Investors flocked to technology initial public offerings (IPOs) that were backed by little more than PowerPoint presentations and flimsy business models. There was no need for the simplicities of, say, “revenue” – let alone “profit.” For years, these dot-com IPOs were great for quick returns. Who needs fundamentals when you can flip a stock for 50% more than you paid a couple months earlier? That is, until it ends. Today, whenever I sense the potential for bullish enthusiasm to override basic common sense, I think about this quote from equity- market pundit Jim Cramer, made during the Internet and Electronic Commerce Conference and Exposition on February 29, 2000... You want winners? You want me to put my Cramer Berkowitz hedge fund hat on and just discuss what my fund is buying today to try to make money tomorrow and the next day and the next? You want my top 10 stocks for who is going to make it in the New World? You know what? I am going to give them to you. Right here. Right now. OK. Here goes. Write them down – no handouts here!: 724 Solutions (SVNX), Ariba (ARBA), Digital Island (ISLD), Exodus ( EXDS), InfoSpace.com (INSP), Inktomi (INKT), Mercury Interactive (MERQ), Sonera (SNRA), VeriSign (VRSN) and Veritas Software (VRTS). Sadly, Jim’s hedge-fund hat got blown away just 10 days after he made this keynote
Who needs fundamentals when you can flip a stock for 50% more than you paid a couple months earlier?
speech. On March 10, 2000, the Nasdaq technology index peaked at 5,132.52... and then collapsed... The tech-heavy Nasdaq Composite equity index fell by 78% in the following 30 months. Most of Jim’s “winners” were consigned to the dot-com bubble dustbin. Today, there is a speculative frenzy occurring that echoes many characteristics of the dot- com bubble. We have transformative, game-changing technological promises that have the capacity to not only reinvent existing business models, but completely upend traditional capital markets and business structures as we know them. And alongside these promises, we have an army of speculators throwing money at businesses which, for the majority at least, will likely no longer exist a few years from now. I’m talking about blockchains, cryptocurrencies, and “initial coin offerings” (ICOs). A NEW BUBBLE FORMING
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