We've entered the final - and stupidest - part of the bull market. Here's why.

November 24, 2017

We've entered the final and stupidest part of the bull market. Here's why.

Back in the late '90's, all a company had to do to drive its stock price higher was announce a shiny new internet strategy and add ".com" to its name. Both underfunded, old-line companies and IPO's that either went public way too early in their development or had no business being in existence at all had popping stock prices. Investors were totally losing their shit over this stuff. Hyper-charging things were new investment products that focused on this trend as if it was an asset class unto itself. It was the speculative part of the tech bubble that we refer mainly as the "dotcom era". Investment bubbles are late stage bull market developments that pop at the end of bull markets.

A company called K-Tel was the ultimate expression of chasing the dotcom fad. Having spent my middle school, high school, and college years all in the 1980's (which was awesome), I knew K-Tel as a company that sold record albums on TV. Greatest hits, number one songs, and the like were the kind of music it purveyed. It was part of the pop culture of the '70's and '80's. In the 90's, I would have never even thought of the company ever again had it not announced it became a dotcom company and its stock skyrocketed. Never mind that I had no idea it was even publicly traded. But it was, as a thinly traded stock that climbed from near worthless to 34. In 2007, it completed a 1-for-5000 reverse split, delisted from NASDAQ and moved to the Over-The-Counter market. But by the middle of the year 2000, its stock was pretty much done for.

Again, I want to emphasize the words "late-stage bull market dotcom stocks". Amazon is the greatest success ever from the era. So, not every internet company investment was a waste of money, but most were. Today, I see echoes of that era in companies that are suddenly becoming "bitcoin" companies.

I couldn't sum it up better than this email I received on November 22

^nd from Bespoke:

Yesterday we published a Chart of the Day titled "Bitcoin-Related Stocks Echo Dot Com Boom." It's a worthwhile read given how crazy things are getting in the Bitcoin/Crypto space. One tidbit from the Chart of the Day is that Overstock.com (OSTK) has now gained nearly 300% since the start of August. The reason? It was then that the company announced a number of new crypto-related initiatives. Prior to August, the stock had fallen from $72 down to the mid-teens over the prior 13 years. In the span of 4 months, OSTK has moved all the way back up to $60/share again. And it has even outperformed the price of Bitcoin by nearly 100 percentage points!

Back to Mitch: If history is any guide, I'd expect a lot more companies to take notice and start accepting payment in Bitcoin. I also expect to see new investment products to package "bitcoin-related" stocks, such as chip makers Advanced Micro Devices (AMD) and NVidia (NVDA), and merchant processor Square (SQ); so everyone can have the ability to jump onto the bandwagon.

I'd say it's about to get real stupid out there, but it already started.

Thanks for reading,

Mitch

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