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Valuations were being surmised and evaluated based on ethereal concepts like “multiples of eyeballs” or sheer employee growth rates. Many of those dot-com firms not only lacked profit, they also lacked revenue. A great number of those were banked by my alma mater, CSFB, Credit Suisse First Boston, which at the time was the “800- pound gorilla” of investment banking for technology firms. During the height of the craze, in 1999, there were 457 IPOs, mostly new technology stocks. With the widespread adoption of the internet, it seemed anything internet-related, or just with a “.com” in its name, could soar in market valuation.įrom 1995 to 2000, the Nasdaq rose approximately 500%. experienced an incredibly strong bull market, heavily fueled by the rapid growth of technology stocks. At that time, so many “new economy” companies lacked earnings.īack then, the U.S. Many in the financial media have drawn a direct comparison between this chart (and thereby the current stock market) to the dot-com boom and bust of the late 1990s. Even after the choppiness in recent days, this return dwarfs the tech-heavy Nasdaq composite, which has recovered by over 100%. That’s more than 5x greater than the S&P 500 return of 75% during that incredible rebound. The price of this particular basket of stocks shows growth of more than 400% from the market bottom to early February. The Goldman Sachs "Non-Profitable Technology Index" has soared since its March 2020 lows Bloomberg, Bianco Research Then, this index showed an exponential spike in 2020 and into 2021, soaring from March 2020 lows. From 2015 to 2020, the index had modest gains. In this case, the below chart measures the performance of the aforementioned index. GAAP-based numbers provide tremendous wiggle room for bankers to come up with whatever narrative they desire. It’s hard for a banker to stay loyal to a corporate client if said banker is forced to reveal the truth about their clients’ business. More importantly however, it’s because fixing GAAP doesn’t support the raison d’etre of the Street. Wall Street research ignores the greatest stock pickers in history, in part, because it’s awfully difficult to fix GAAP’s problems. Adding to that list, in the words of the late, great Marty Whitman, “GAAP is not truth or reality.” At one point or another, many of the greatest investors on the planet have taken similar shots including Charlie Munger, Seth Klarman, Shelby Davis, and the father of value investing himself, Ben Graham. Buffet is not alone in openly challenging the reliability of as-reported numbers.