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Deja Disaster?

Today on Fox Business‘ Varney & Company, David Bahnsen (The Bahnsen Group) was asked if the current market reminded him of the Bubble. He said it did, but not the part about all those worthless companies that went bust. Big companies like Cisco, Microsoft, and Intel also had parabolic up moves, and then they had parabolic breakdowns from which it took years to recover.

In the bubble, there was a belief that companies with a pile of web pages were going to make a pile of money. Currently, there is a frenzy that is derived from unrealistic expectations regarding AI. Yes, AI will be successful, but the specifics have yet to be seen, and there is a hint of Tulip Mania in the air.

We don’t know how it will eventually play out, but there will eventually be a bear market, and we will see those so-called “bullet proof” stocks get shot full of holes. To demonstrate what can happen, lets look at what happened to the stocks of some solid companies during the bust. Just to be clear, I lived through those days, and I can say that today has a very similar look and feel. Yes, 9/11 contributed to the decline, but most of the damage had been done before then.

In 2000, pre-iPhone Apple was not the company it is today, but it was a solid company. It then lost -82%, taking five years before returning to its 2000 high.

Amazon was still a book store. It fell -95% and took 10 years to recover.

Cisco was one of the biggies in 2000, and it fell -90% and took 22 years to recover.

Intel was another favorite back in the day. It fell -83% and took 18 years to recover.

If any of these stocks was bulletproof, it was Microsoft. It fell a meager -67% and took 15 years to recover.

Finally, Oracle fell -85% and took 14 years to recover.

CONCLUSION: We do not know how or when the inevitable “adjustment” will materialize, but we think it is bound to happen, because it always, always, always does. We do not mean to imply that there will be losses similar to 2000-2002. But there is the history. Will we learn from it?

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