This chart is downright frightening—only once in history have the valuations of U.S. Stocks been so high—that was just before the Dot Com Crash of 2000. Is history about to replay itself? Are we are on the cusp of the third Stock Market Crash in 20 years?
If we were in the strongest economy ever, a hugely overvalued S&P 500 would be way understandably optimistic. But in the midst of the Covid pandemic, a worldwide economic recession, and our country still in lockdown mode— the value of most Stocks seem nuts. We feel a Stock Market correction/crash is virtually guaranteed— this time worse than the Dot Com Crash, worse than the 2008 Financial Meltdown.
They say, people who don’t know history are bound to repeat it. So, we decided to remind readers of the Dot Com Crash as, once again, high tech Stocks have been going crazy in 2020. P/E values are off the charts. The extremely price of Stocks are hard to understand. Apparently, a new generation of investors have piled into Tech Stocks again with what can only be described as a Replay of the Dot Com Crash.
Beware of Irrational Exuberance
After years of irrational exuberance in high tech and internet Stocks, it all came to an end abruptly in the Dot Com Crash as all Stock bubbles eventually do. The dot-com crash destroyed more than $5 trillion in market value wiping out IRAs, 401Ks, and stock brokerage accounts.
From a March 10, 2000, high of 5,048.62, the index tumbled to 1,139.90 on Oct. 4, 2002, for a whopping 76.81% drop. The Dow Jones fell 27.38% while the S&P 500 best Stocks in America lost 43.19%.
If you’re convinced that you don’t have to worry about crashes because Stocks always come back, then consider this—
- When the NASDAQ fell by 76.81%, the market needed a more than 400% miracle to recover.
- The NASDAQ took 15 years to recover to the highs of year 2000.
- Let me repeat: The dot-com crash destroyed more than $5 trillion in market value.
Here’s a brief list of NASDAQ Stocks where investors lost everything—
- Pets.com
- EToys.com
- Webvan.com
- Flooz.com
- TheGlobe.com
While virtually every dotcom stock took a major hit when the bubble burst, many disappeared leaving investors with nothing, zero, nada. The high tech corporate survivors were few and far between.
During every economic cycle, Stocks rise and fall, new corporations come along. Success comes in finding Stocks fairly valued and with real products, services, and management. Corporations with sales and profits are a requirement for me so my Stock has a good chance of a rebound as the rest of the industry is in “crash and burn” mode.
My advice today is exactly same as it was in the run-up before the Dot Com Crash— reduce your Stock exposure, buy lots of Gold and Silver. You’ll make money in hard assets while paper assets values are falling.
