Are We Experiencing Another Dot-Com Bubble Now?

Dear Reader,


Since 2009, US stock markets especially, have risen a lot. The five largest information technology companies Apple, Microsoft, Alphabet(Google), Amazon and Facebook have recorded gains much in excess of the gains of the S&P 500 Index or the Dow Jones Industrial Average Index.

Are we experiencing another dot-com bubble, especially in the USA? Yes. This time, however, the bursting of the bubble will not lead to losses in excess of 70% for the Nasdaq Composite. More likely, the Nasdaq Composite will fall by 30-40% in the space of several years. The main reason for my conclusion is that this time around the leaders of the current dot-com boom Apple, Microsoft, Alphabet(Google), Amazon and Facebook are making net profits and their valuations are not stratospheric as at the height of the dot-com boom in 2000.

Many private technology companies, however, are significantly overvalued. The bursting of the still private IT companies bubble will still be significant, but not so much widespread as the 2000 dot-com bursting. Yes, merchant banks like Goldman Sachs and asset managers like T. Rowe Price have invested in the aforementioned private IT companies, so they will suffer some pain. Otherwise, the bursting of the current dot-com bubble should not threaten the livelihood of the financial system. Yes, the bursting of the current dot-com bubble will cause a prolonged and deep recession.

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Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich