Back then the leading large bubble stock Cisco rose 133%, while today’s leading bubble stock—Tesla—was up 110% from September to peak. Pure dot-com areas roughly tripled, just as cannabis funds have this time.
But the plunge of share prices in clean energy, electric cars, and cannabis, and even the halving of bitcoin, puts much less of a dent in the wallets of consumers than the dot-com bust did, because the bubble is less widespread. Nasdaq’s bubble gave it a value of about half that of the S&P at its 2000 peak, while even with Tesla the frothy sectors of the past nine months are a fraction of that.
The boom-bust parts of the market also raised and spent less money than the dot-coms, and employ fewer people. If businesses fail as shares deflate they are likely to have less economic impact. Fewer large companies are investing in an imaginary “new economy,” and where they are investing, as with the shift to electric cars, they will probably continue for other reasons, even as shareholders pull back.
Treasurys provide more support to stocks this time, too. Back in 2000, investors worried about the stock market could earn nearly 7% from 10-year Treasurys, making a switch appealing, especially as the consensus forward earnings from the S&P were a mere 4% of the price. This time the S&P has a similar earnings yield, but Treasurys offer a paltry 1.5%.
There are other threats to both the economy and stocks, of course, but I’m hopeful that the dot-com repeat of the past nine months will be no more than another of the mini-bubbles that appeared and vanished several times during the post-2009 bull market, albeit bigger than the others.