The dot com bubble rose in the late 1990s, peaked on March 10, 2000, then burst, with indivudal company stocks popping like popcorn on any given day and the rest of the Nasdaq nosediving in April. Here's CNN on April 14, 2000…
The index lost over 1,000 points this week and is now off more than 34 percent from its record high set March 10 – well beyond the 20 percent decline Wall Street sees as the beginning of a bear market. … analysts say little fresh fundamental news was behind the week's losses. Instead, months of greed that fueled one of the greatest bull markets in history turned to fear on changing sentiment that the highest flying technology stocks rose too far, too fast.
Gail Dudack, market strategist at Warburg Dillon Read, told CNN's Street Sweep that some of the losses could be linked to investors who, faced with losses, sold stocks to meet their brokers' margin account requirements. (392K AIFF) (392K WAV)
As investors dump overpriced stocks to either meet margin calls or take profits before the highflying technology leaders plummet any farther, bargain hunting may be on the horizon.
David L. Farquhar posted a retrospective of the times: "Pinpointing when the dotcom bubble burst is harder. But pinpointing when it reached its biggest point is easy."
A company didn't have to be profitable for its stock to boom. Netscape was the poster child for this. It created a necessary product, but Marc Andreessen and Jim Clark couldn't figure out how to make it profitable. Andreessen is only rich today because he and Clark managed to convince AOL to pay $10 billion for the company before they could finish running it into the ground. Transmeta was another example of a company with interesting technology but no profits. Competing with Intel wasn't any easier during the dotcom bubble than it was in the years right before it.
The stereotypical dotcom business model went something like this: Find something nobody's selling on the Internet. Register a domain name. Start selling that product on the Internet. Then wait for profits to happen like magic. And without a solid business plan that included things like logistics, those profits rarely happened and typically weren't sustainable when they did. Just like in any other business. But since this was the Internet, it was going to be different this time, somehow.
A house of cards without having to even bother making any cards.
