Dot Comedy

The craziness of the dot-com bubble around the turn of the century.

The Financial Times Stock Exchange 100 ("Footsie", see below) is being overhauled:

out: Scottish and Newcastle, Whitbread (both large drinks/entertainment firms): employing around 160,000 between them, combined profit last year around GBP650 million.
in: Freeserve and Baltimore: employing less than 600, combined profit last year, errr, minus GBP 21 million

A couple of weeks back, TheEconomist carried a chart showing that Amazon's market cap has increased roughly in the same proportion as their operating loss since they floated. Amazon are rated a safe investment, yet their operating loss increases year on year. This is a business model I don't understand.

I do. DotCom is the largest running (legal?) pyramid scam the world has ever seen. [What about pensions?]

Well, most of what I know about economics I learned by reading JohnKennethGalbraith?, so I was thinking that I was being too cynical about this raw MarketCapitalism?, but maybe not...

A lot of UK pensions and life assurance are "invested" in funds that, in part, track the FTSE100, including mine. And I worry, I really do.

Come April, start of the UK tax year, I'm going to open an ISA (tax-efficient equities based savings account in the UK), and I'm going to some effort to avoid ISA's with a heavy dot.com component. Seriously. This is a bubble waiting to burst.

--KeithBraithwaite

The Footsie: there is some kind of weighting involved, but the Footsie is more-or-less the top 100 companies traded on the London Stock Exchange, ordered by market capitalization. For Americans: this would make it more like the S+P 500 than the Dow, say.

If it makes you feel any safer: James Suroweicki, the "Moneybox" columnist for Slate (http://www.slate.com), has pointed out that not every company with ".com" in its name has been minting money. Etoys.com, for example, peaked above US$80/share in October and is now trading at about US$13. Therefore, according to Suroweicki, the DotComedy is not really a bubble -- investors are doing something to evaluate companies and dumping the stocks that don't look promising.

On the other hand, somebody was buying Etoys.com when it was at 80, and I hope it wasn't my retirement fund.... --SethGordon

The net worth of a company is considered to be the discounted future earnings. has anybody an idea of how much profit for example amazon has to have in the future years in order to justify their market capitalization? ThomasMaeder

re: not a bubble - one market analyst (on BBC Radio 5) described what is going on as a market froth - not a bubble market, but a whole pile of little bubbles contributing to the greater fizz (hence what happened to eToys). Some eejit shook up the internet can before opening it -- BrianEwins

Saw something on CBC Newsworld the other day. The same thing happened with radio when it came out. Imagine having technology that put information in everyone's homes! Radio stocks soared to the moon. However, even if you guessed right and bought RCA stocks at the peak of the wave, it would have taken 25 years before you broke even.

Aparently NASDAQ is running at 78 times earnings. Isn't the normal ratio something like 10-20 times earnings? -- SunirShah

Stupid dot-com ideas from the time:

Online hunting -- a robot would go where you want to remotely and shoot animals in a private park on your command.
Order to have dog poop put on an enemy's lawn.