Personal Finance Topics / Macroeconomic Trends and Risks
No. of Recommendations: 1
GoofyHoofy posted an excellent recap of the AI bubble which resembles the 1999-2000 dot-com bubble. He finished by asking, "How would you play this?"
Let me ask all METARs:
If you knew then what you know now, how would you have invested in 2000 - 2002?
Wendy
No. of Recommendations: 0
@Wendy,
2026 to 2030 investing
Property in the US and Ireland.
Heavy industry in the US
Tech in Europe
No. of Recommendations: 8
If you knew then what you know now, how would you have invested in 2000 - 2002?
I don't want to use hindsight too much, but one of the main lessons is that valuations matter. One of my favorite examples is Cisco. Great company. Consistently profitable. It did in fact provide the hardware backbone of the Internet just as promised. But its peak stock price was way too high. Cisco's stock still has not returned to its inflation adjusted peak price.
One of the other the lessons of the dot.com bubble was the hype was real. Not all the hype, but by that I mean the Internet really did transform how everyone interacted and did business and the companies who controlled the Internet did in fact wind up controlling the future. That part was absolutely true. The part that was false was that it wasn't enough to be an Internet company, you had to be a good Internet company.
Amazon was a good Internet company. Bezos had an extreme amount of guts. He was willing to lose money for years in order to set up Amazon up as an untouchable behemoth, which was the model most dot com's were trying to follow. He actually made it work though. He wasn't afraid to fail either. He'd try different things and if they didn't work he'd move onto the next thing. Remember Amazon Auctions? Didn't work, they moved on. It is unfortunate that Andy Jassy is slowing killing the golden goose.
eBay was hyped beyond all imagination, but was a solid business and emerged in good order and even got stronger.
Microsoft is an interesting case. A lot of people view the 2000's as as sort of a lost decade for Microsoft. They missed out on search. They whiffed on mobile. Vista was disaster. They went from total domination of the browser world to an after thought. Even Microsoft eventually gave up on Explorer. Their new browser Edge, is based on Chrome. The stock price remained flat for the next decade. Almost unnoticed the whole time was they were making money faster than they could count it. Ballmer talent spotted Nadella and correctly saw the world was moving to the cloud, and he successfully transitioned Microsoft into an enterprise software company. A lot of people knock Ballmer as being sort of a mid-CEO. But he had a lot of success and did a lot. He also didn't buy Yahoo! which a lot of people thought was a mistake at the time.
Google's IPO was post-dot com in 2004 but it was founded in 1998. So it is kind of dot commie. At IPO, the stock market was still a little hung over and the IPO price was a bargain. On the business side of things Google cleaned everybody's clock. Fun fact: Jeff Bezos provided 25% of Google's initial funding round.
And of course Cisco. With dividends reinvested, it has returned approximately 1000% from the bottom until today. Not as much as some, but not bad at all.
So the lesson is: Valuations matter. Memorize it. Write it on a piece of paper. Stick a pin in it.
No. of Recommendations: 2
If you knew then what you know now, how would you have invested in 2000 - 2002?
I don't believe in hindsight, but I am pretty much investing now essentially the same way I invested then, based on stocks being too rich for my blood. I put no new money into the market and sold stocks I felt were over valued for the risk, keeping the proceeds in cash. When the market tanked, I put the cash to work buying stocks that were on sale. Major difference now is that we no longer have a paycheck, and my risk tolerances are lower.
Have not done much in terms of juggling this year, other than take profits on AVGO, which had become too big a portion of our portfolio and in the wrong account, using that to offset some losses. Bought for post split price of $18.50/share during Covid plunge, and sold for $359/share, maintaining a large number of shares that are still in the wrong account but not much I can do about it because of extreme tax consequences. Also taking Federally tax free gains on the sale of our primary home, assuming the sale proceeds to the end. Not buying another home at this time, so that will add a significant chunk to our cash holdings.
I do realize that even at the interest rate we are getting on our cash, being cash heavy comes with risk of it's own, but right now trying to optimize ability to take advantage of future opportunities, where ever and in what ever form they may take.
IP
No. of Recommendations: 0
apply to both 'get rich', 'stay rich' camp.
a. cant time the top, leave the frothiest sectors\names and utilize any losses. have fund managers that do same.
b. hy spread is a reliable buy indicator.
c. value will emerge first, and be ahead for a few years. keep an eye historical growth:value premium.
new: if you think trump damage is lasting (e.g., scotus), use same rules for foreign earning equities.
