Market Beat: The dot com bubble
May 20, 2013
Recently the NASDAQ went over 3400. That is the highest level for the NASDAQ in 12 and a half years. The peak for the NASDAQ came on March 10, 2000, when it touched 5132 and closed at 5048.
Shortly after that the dot com bubble burst and many once high flying tech stocks declined drastically. When the NASDAQ was peaking, people where talking about high these internet stocks would go and how the future of the internet would dominate commerce. Many of the once high flying internet stocks have never come close to touching their old highs set back in the year 2000.
Amazon is one of the exceptions. Amazon recently hit an all time high of more than $280 per share. Even though Amazon took a beating in the burst of the dot com bubble, it has fully recovered and gone on to set new highs and emerge as the dominate online retailer.
Google wasn't part of the dot com bubble — their initial public offering was back in 2004 and it came out priced at $85 per share, and then opened at $100. Today Google is more than $860, and hit an all-ime high last week. Google is up more than 20 percent year to date and 40 percent in the last 12 months. Their latest product the Google glass is yet to be released.
Meanwhile, some traditional big box retailers are struggling. It has been a tough year for J.C. Penney. At one time, Circuit City was the second largest electronics retailer in the U.S., and they had to liquidate and file bankruptcy. Successful big box stores like Walmart combine having a store with internet sales and marketing.
Many consumers today engage in a practice known as "show rooming." What that means is that they'll visit a retail store, check out products that they have an interest in, and then go online to make the purchase and find the best deal they can get.
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Globally, about 44 percent of internet users are in Asia, and only 11 percent are North America. China alone has more than 500 million internet users, and internet sales in China are forecast to top $420 billion annually by 2020. China's largest e-commerce is a company known as Alibaba Group Holding Ltd., one of their subsidiaries; Taobao.com has over 500 million registered users.
It's been more than 13 years since the dot com bubble began to burst, but online shopping is here to stay and should continue to grow.
Kenneth Roberts is a Truckee based Registered Investment Advisor. Information on his money management service can be found at his blog at http://www.sellacalloption.com or by calling 775-657-8065. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.
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