In 1999, a truly remarkable thing happened. The NASDAQ (National Association of Securities Dealers and Quotes) had the biggest run-up in the history of any segment of the US stock market. Starting in late September, the technology stocks, which account for most of the types of stocks in the NASDAQ, staged a blistering run-up that created instant stock market millionaires.On top of that, this run-up came at the end of almost 7 years of very nice yearly returns. Because the market had been so healthy for so long, it started to get the attention of literally millions of average people who had never once in their lives bought or sold a stock on their own. Previously they had left that to brokers or simply bought a mutual fund or two.
Eventually, people got tired of simply watching the market, and especially the technology-driven NASDAQ, giving returns of 18, 19, even 22% a year, and soon decided it was time to get involved with “personal investing”. An online “boom” was created with millions of people scrambling to open trading accounts and start trading stocks! It was an exciting time, but also for us a troubling time. These hordes were piling in at a fantastic rate, without even the most basic idea of what trading/investing was really about. Sure, there was the neighbor giving advice, and the guy at work who seemed to “know it all,” but the fact was these people were probably “newbies,” too.
By the time September of ’99 rolled around, online trading was growing at 40% a month. Thousands of people had quit their jobs and decided trading was much easier than the 9-to-5 grind. Guess what? IT WAS. They could literally throw a dart and buy just about anything and it went higher. Nothing could be easier! In fact, it wasn’t a matter of finding a stock that was moving higher, the strategy was to find the stock that would go the “highest, the fastest”. By December, it was like nothing anyone in the financial world had ever seen. Daily gains of 10, 15, 20 dollars per share was not only common, it was the norm. Everyone was making money, everyone was an “expert,” and this was the way to massive wealth. “Dot com” financial sites were springing up at the rate of 10 per day, spewing out their version of why they were the best stock pickers. And it didn’t stop.
January 2000 saw it move even higher. February it got even hotter. But then in March, it stopped. On March 10, 2000 the market sold off heavily, and that was the start of a major-league bear market that persisted throughout the year. A bear market means the stocks were going “down” instead of “up.” Well guess what? The people who became attracted to the market for it’s easy gains had never seen a bear before. They hadn’t been in the game long enough to know of the carnage of the bear markets of the 1970s and 80s. So they kept buying their favorites. And the favorites kept falling.
We predicted on March 12 that the party was over and we were in for a “huge” pullback. Did that mean there was no money to be made from then on? Oh, no! People who were ready for the downturn and knew how to capitalize on it made multiple millions. But unfortunately those hordes that stampeded into the market didn’t know what to do. They had no instructions. Their “neighbor” who was so good at putting them in a “hot stock” was going broke. The guy at work with all the answers couldn’t understand why his stocks kept falling day after day. The “fly by night” Dot com financial sites that only sprung up because of the huge rally didn’t know what to do and gave their people the wrong advice. Most shut their doors. It all ended very badly.
Over 300 stocks that were trading for over 100 dollars per share in March were less than a dollar a share by December 25. Another couple hundred that were over 200 dollars per share sank under 10 bucks. The carnage was so severe that by December newly formed Dot com companies that were supposed to be the “new world economy” were going out of business to the tune of 3 per week. Household names like Microsoft, Intel, and Dell saw their stocks plunge 50 and 60%. Right on the heels of the biggest “bull run-up” in history came the sharpest stock market decline in history. It was tragic.
So how did the millions of newly excited “investors” fare during this? Not well, friends. No longer was the market “the” topic of conversation during parties. No longer were people quitting their jobs–they were out hunting for jobs. Over 3 “trillion” dollars disappeared in that market meltdown. Money just doesn’t vanish, folks. It was “taken” from one person and given to another. The unskilled lost it, and the very, very sharp got it. People went bankrupt, lost their homes. Entire life savings were swept away in 8 months. Some people will be in debt over this for many, many years, as they mortgaged their homes for money to play the market. Now they have a 30-year mortgage to pay on money they will never see again. It was saddening to watch, day after day, as people lost their newly found fortunes. It was much sadder to see them lose their life savings. But it did happen, and now the people who are “left” are the survivors.
Were there any bright spots during this incredible carnage? Oh yes, friends, there were. People trained properly on what to do when the “bear wakes up” made a fortune. These people were getting good information about why the bull had run up, and why the bear’s bite would be so severe. They were the people who subscribe to our newsletters. We predicted the meltdown and explained why it happened. We predicted the “mini recession” that would be coming and how to profit from it. We predicted the California electrical problems, the rise in oil, and the interest rate cuts from the FED, and how to profit from all of it. We put out the specific investments that would benefit from all these problems. Basically, our readers were prepared for all of it. Were you? Do you know the “real” reason the market went up so big in 1999? Do you know exactly why it “had” to fall apart in 2000? If not, I suggest that you are listening to the wrong people.
We truly hope that you become a subscriber to one of our publications. The market is a much different beast than it was just 10 years ago, and we feel it takes much more good information now to be successful, more than at any time in history The advent of the Internet, while being a blessing, has changed everything. Information that used to trickle through the market over a few days is now disseminated in seconds. Daily price movements of over 100 points up or down on the leading averages are common now. Because we have become a “global economy,” when something happens in Europe or Asia, our markets react to it instantly. Because of the tremendous debt load our corporations have taken on to expand their domestic and foreign operations, knowing how to deal with currency fluctuations, interest rates and a host of other things will spell out a good investment decision versus a tragedy. For instance, take this little quiz? Why is it that an electrical shortage in California may have a huge impact on interest rates? If you don’t know the answer to a question like that, it is clear that you are not getting the important information. Did you know that you might be invested in companies that could get crushed if the problem expands? Our readers know quite well why California’s problems keep them from investing in certain companies, and they also know what stocks to buy because of it!