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How many of you watched in amazement as companies with the names of Amazon.com, Ariba, and Yahoo grew faster and stronger than companies with names like Proctor and Gamble, General Motors, and Wal-Mart? What was happening was the Internet craze.
The Internet was the wave of the future and if you had a website and a business plan, you could generate millions, if not billions of dollars in venture capital money. There were new businesses going public on Wall Street every day that varied from online flower delivery to the world’s largest virtual bookstore. Who needs to go to the doctor; I’ve got my online physician. What’s next a kid making enough money off his IPO to buy his favorite pro football team? There were no boundaries to how large the profits could grow according to many of the “internet analysts” on Wall St. The next craze to go with the virtual world was the online investor. Who needs a broker; I’ve got my neighbor telling me which business-to-business Internet company was going to $400 a share next. I’ll just hop online and make my next million. Why pay a broker to tell me to buy a company who grows their earnings at 20% annually? A woman who works in my office bought AOL at $200 a share and it went to $300 in a couple of weeks. This was the feeling in the market, as was the driving force behind the ascent of technology stock prices to astronomical levels.
Unfortunately, we know how this story has ended. The bubble burst and billions of middle class America’s hard earned dollars evaporated with the websites. Internet, fiber optic, B2B, and e-commerce companies that were trading at $200, $300, and $400 a share are now trading in the low single digits, if they haven’t filed bankruptcy. John and Julie Investor blew their life savings by jumping into the market at the wrong time and with the wrong strategy. We hope that no one who is reading this actually fits into this category, however, reality tells us otherwise. The effects of the Internet bubble are still being felt in the world economy. There is a great fear in the economy to invest in the stock market again because of the pain that occurred with the sell off in mid 2000.
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