Dotcom Bubble

 

19th Century, America

 

Level of Craziness: 4 stars

Duration: 6 years

 

From 1995 to 2001, the US market witnessed the growth of new technologies and capital. Speculators turned their attention to the Internet sector and related fields, looking into high investment returns through rapid growth stocks in the short time. Shares of European and American IT companies rose rapidly, and the Nasdaq index reached 5,400 points from 1,000.

 

From 1995 to 2001, the US market witnessed the growth of new technologies and capital. Speculators turned their attention to the Internet sector and related fields, looking into high investment returns through rapid growth stocks in the short time. Shares of European and American IT companies rose rapidly, and the Nasdaq index reached 5,400 points from 1,000.

 

The combination of soaring stock prices and buyer speculation led Internet companies to abandon standard business models and turned to increasing market share, focusing most of business on advertising rather than using technology innovation to create value.

 

During this period, many ".com" Internet companies were established. Some companies were able to increase stock prices by simply adding an "e-" prefix or a ".com" suffix to company names—so called "prefix investment."

 

At the beginning of 2000, the Federal Reserve implemented contraction monetary policy, which caused a rapid reduction of funds available for investment. In addition, the performance of many Internet companies at the end of 1999 wasn’t promising. Eventually, the bubble start to burst in 2001, with equities entering a bear market.

 

From March to October 2001, the Nasdaq index fell 77%, and many venture capital funds lost billions of dollars. However, despite the Dotcom Bubble burst, a dozen of outstanding technology companies survived and later became today's tech giants, including Amazon, Google, PayPal and Yahoo.

 

 

 

 

21st Century

 

Craziness Level: 4 stars

Duration: 6 years

 

Bitcoin was introduced in 2008. Ever since 2013, it has witnessed a large number of investors entering the market, and the value of Bitcoin had experienced cyclical ups and downs.

 

Central banks around the world have stepped in to slow the speed and limit the form of circulation of virtual currencies. Even though governments did strengthen supervision through various means, there are still many speculators entering the transaction. The three-digit price volatility level doesn’t stop speculative fanatics, and many people even see virtual currency investment as a chance to get rich overnight. After Facebook recently announced the issuance of virtual currency, Bitcoin has experienced another round of gains.

 

In this paradox of public opinion and speculation, there are also skepticism and repeatedly ask questions: Will the virtual currency bubble eventually burst? Many rational investors and institutions have been watching, and many view the Cryptocurrency Bubble as the drama of the first half of this century.

 

 

 

The Chinese Spirits Bubble

 

21st Century, China

 

Craziness Level: 2.5 stars

Duration: 3 years

 

In 2017, shares of several major companies in the China A-share liquor sector, featured by Wuliangye and Guizhou Maotai, soared by 90%. Since 2018, the liquor sector stocks have appeared on the recommendation lists and key research sections of major institutional analysts. Toegther with media coverage, the speculation in the short term stimulated the increasing stock price of these companies.

 

However, if we take a closer look, we may find that the valuation and performance of those companies are indeed relatively stable, with large uncertainty in the domestic supply and demand for liquor. In China, the demand for liquor is closely related to official reception fees and commercial activities. Such information is known internally for wine companies, yet inaccessible for individual investors. Therefore, investors should invest prudently, and always keep in mind the difference between price and value.

 

 

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