Between 1996 to 2000, NASDAQ stock index exploded from 600 to almost 5,000 points. Money flowed like water in Silicon Valley. In 1999 there were 457 IPO’s. And then one day the DotCom bubble popped This short presentation gives an overview - you can also head over to my blog and read a bit more on http://bubblespotting.blogspot.com/

1. BUBBLE SPOTTING SERIES - 2014
QUICK SUMMARY FORMAT

2. This short presentation on the Dot.Com Bubble forms part
of a larger series of presentations on Market Bubbles
Front page graphic - own

3. BACKGROUND
The Microsoft Windows Operating
System ™ (launched in 1985), opened up
new opportunities in personal
computing. This lead to significant
growth in number of PC’s, further
buoyed by internet access in 1992,
which caused pc usage to grow
exponentially.
wired.com

4. During this period, significant
investments were made in the
software development industry,
notably in the usa. Software was seen
a highly profitable investment and
software development companies
were strong performers on the stock
exchange.
wired.com

5. Hardware manufacturing on the other
hand, was being taken over by Asian
companies who could compete
competitively on price and quality.
wired.com

6. Many new start-up companies were
formed, buoyed by low interest rates
between 1998–99. Everybody wanted
to be the next Microsoft.

7. This attracted the attention of
venture capitalists. Their strategy
was to finance, take these start-ups
public and, hopefully, reap massive
profits in the process.

8. As a result of the economic boom,
Economists started speculating that
the world had entered a “new
economy”, and that “old economy”
concepts like corporate earnings and
other traditional financial criteria was
maybe not as important to internetbased businesses anymore.

9. Start-ups were measured on their
burn-rate: how long it would take to
burn through (different rounds of)
seed capital before being profitable,
and on their ability to expand their
customer base (regardless of cost).

10. Many start-up companies were run by
individuals barely out of college. Many
start-ups (or their management) had
No real Track Record , NO profit
HISTORY to speak of, BUT were raising
millions of Dollars in IPO’s due to
public excitement AND MEDIA HYPE.

11. Many start-ups went through several
stages of funding before either
turning profitable or finally going
bankrupt.

12. Between 1996 to 2000, NASDAQ stock
index exploded from 600 to almost
5,000 points. In 1999, there were 457
IPO’s, most of which were internet and
technology related. Of those 457 IPOs,
117 doubled in price on the first day of
trading (due to hype).

13. Between 1999 and early 2000, the U.S.
Federal Reserve increased interest
rates 6 times in an attempt to cool
down the economy.

15. On 9 March 2000, the NASDAQ
peaked at 5,048.62,
but from
10 March 2000 proceeded to
drop 10% over the next 10 or so days.

16. Barron’s magazine shocked the market
by publishing a story (“Burning Up“ MONDAY,
MARCH 20, 2000) that indicated the end was
near "During the next 12 months, scores of
highflying Internet upstarts will have
used up all their cash”

17. In subsequent months, many companies
reported huge losses and some folded
within months of listing. Various
accounting and other irregularities
were identified.

18. BY 2001 the number of IPOs had slowed
to 76, - none of which doubled on the
first day of trading.

20. Reality started setting in. Within
months after peaking, Nasdaq lost
78% of its value (top to bottom).

21. * As per the International monetary
fund - which corresponds with the
value by which American households’
equity holdings had declined (44 %)

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23. Dot.com bubble
http://www.thebubblebubble.com/dot-combubble/
http://www.investopedia.com/terms/d/dotco
m-bubble.asp
http://www.moneycrashers.com/dot-combubble-burst/
http://www.businessinsider.com/heres-whythe-dot-com-bubble-began-and-why-it-popped2010-12
http://www.scaruffi.com/politics/sv.html
http://www.cnet.com/1990-11136_1-62783871.html
http://www.imf.org/external/np/seminars/e
ng/2012/fincrises/pdf/ch12.pdf
http://www.cnet.com/1990-11136_1-62783871.html
http://www.cnet.com/1990-11136_1-62783871.html
http://thenextweb.com/entrepreneur/2011/1
0/27/17-dot-com-failures-and-their-moderncounterparts/#!qzNFE
http://en.wikipedia.org/wiki/Dot-com_bubble
Also See
Irrational Exuberance - Robert Shiller
Extraordinary Delusions and the Popular
Madness of Crowds - Charles Mackay

24. This presentation is provided in the sake of public interest, and has been compiled based on
publically available information sources on the web.
While great care has been taken in the preparation and compilation of information indicated here,
the author does not accept any legal or other liability for any inaccuracy, mistake, misstatement or
any other error of whatsoever nature contained herein.
This presentation is not investment advice, not a solicitation for any type of investment, financial
or otherwise, nor is this presentation an opinion expressed on, nor endorsement of markets,
commodities or investments.
Any names, trademarks and images are copyright their respective owners and rights in the
graphic artwork and photos used in this presentation belongs to, and are courtesy of the
respective owners thereof. Unless where otherwise indicated, I don’t claim to have any rights
therein.