The 2021 Dot Com Era Bubble?

Today we're discussing if I think we're in a stock market bubble, the Dot Com Bubble, the similarities and differences to the dot com era crash, and what you should do to prepare!

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Timestamps:
0:00 - Start Here
1:29 - What happened during the Dot Com Bubble?
5:34 - Similarities of today to 2000
8:36 - Differences of today to 2000
11:00 - How should we be thinking about it?

Dot Com Bubble:
Back in the mid 90s, the internet was pretty new. At the same time, interest rates were relatively low in the US economy. So in the mid 90s when Netscape went public, the company's shares rose from their IPO price of $28 to trade as high as $75 before closing at $58 on the first day. Now keep in mind, before this IPO - this wasn't really a regular occurrence.

So investors and entrepreneurs were shocked and when they saw this, well, a lot more internet companies started to sprout up, and a lot of investors threw any cash that they had at these companies because the internet was going to "change the world" and markets for them were theoretically super large.

Soon these companies didn't care about having sustainable business models or making profits, they just wanted to show sales growth and potential because that's the only thing that mattered during the internet boom.

Investors started to ignore traditional investment metrics, and just wanted to get into companies that could build their market share quickly. That exuberance lasted from 1995-2000.

But in February of 2000, the Fed Chairman at the time announced plans that he would aggressively raise interest rates, this shook the markets with volatility, but the true bubble burst when on March 13, 2000 - Japan announced that they had entered a recession, triggering a global sell off. It was pretty downhill from there, the Nasdaq started to slide quite a bit, and culminated in a big drop on April 14, 2000 - Nasdaq Composite index fell 9%, ending a week in which it fell 25%.

Similarities:
The IPO market today is very similar to pre 2000. It's almost as if no one cares what the company does, or what it's going to do, especially when it comes to SPACs.
- Point 2: Interest rates are the lowest they've ever been, at 0.25%, just like my example I mentioned earlier, it's incredibly cheap to borrow money right now.
- Point 3: With the expansion of monetary supply because of COVID stimulus, our money supply has gone from 15 trillion in early 2020 to almost 19.5 trillion at the end of 2021. I didn't mention this earlier, but in 1999 Alan Greenspan also increased the money supply in the final months of 1999 to account for the "Y2K" computer bug that most Americans thought would ruin the financial system.

Differences:
- The same bubbling factors of 2000 has not really affected or impacted the big names such as FB/Apple/Amazon/Microsoft/Netflix and Google.
- The craziness is mostly concentrated in a few pockets this time around, most notably, cryptocurrency, TSLA, and SPACs that are flavor of the week. Things are certainly expensive but there is an expectation that there will still be a massive bump in consumption as the vaccine rolls out this year.
- Back in 2000, when the interest rate of the Fed Runds rate increased to around 6.50%, many investors that didn't want to get into stocks, could just get a pretty good return from bonds and other products like CD's at banks.
- Since the interest rate is near 0 now, and hasn't been close to 5% since 14 years ago, there isn't an amazing alternative to stocks right now besides real estate or alternative assets.

▶️ My name is Humphrey Yang, I've built multiple businesses and am passionate about Personal Finance. If you're trying to build a solid foundation of financial literacy, learn to invest, or become financially free - then I'm here for you! This channel cover topics like getting out of debt, managing money, building credit, multiple income sources, passive income, etc.

Disclaimer: I am not a financial advisor, any investment commentary are my opinions only. Some of the products and services that appear on this channel are from companies that I have an affiliate relationship with, such as Robinhood, for which I recieve a small percentage made via those links, but it doesn’t cost you anything extra!

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Видео The 2021 Dot Com Era Bubble? канала Humphrey Yang