RE: Booms in different eras.
I don't know of any works that examine the different booms from 1944 to the present. The seminal popular work along those lines is still Charles Mackay's "Extraordinary Popular Delusions and the Madness of Crowds" but that predates what you're looking for.
When I think of some of the different booms besides the ones I mentioned, three come to mind: television, electric utilities, and the Go-go era of the 60's.
Wall Street's attitude toward television in the late 40's/early 50's was no different than today's Wall Street's attitude toward the Internet today. In both cases, Wall Street correctly decided that the product was going to create a revolution in many ways. Alas, I think that Wall Street today is also making the same mistake that it made back then in extrapolating trends ad infinitum and thus taking away much of the long term profits available. For example, if you look at almost all of the early players in the television industry--Admiral, RCA, Philco, or DuMont Labs--none provided good returns for their shareholders. Even the most successful of the group--RCA--has provided very poor returns for shareholders, returns far below the market. Even then, the only thing that has prevented shareholders from losing money was a takeover and subsequent excellent performance of RCA's parent, GE. Without GE's performance of the last 2 decades, RCA shareholders would have lost money from the infancy of the television era. The other companies mentioned went out of business, driven out by companies that were supposedly way too late in the game to get any market share. Just like today, investors back then overlooked profits and looked to revenue growth. That logic did not provide for good long term returns then, and I don't think that it will now.
In the electric utility boom of the 50's, the market played on the electrification of America. Most of the electric utility stocks traded at multiples of 40 and 50x earnings, and most analysts thought that America's appetite for ever expanding electric capacity was endless. It wasn't, and a portfolio of T-Bills outperformed a portfolio of utilities since then. IMO, I see America Online as no different than those utilities, and see AOL as a stodgy, boring stock in 20 years, with a below market PE to go with that image. We'll look on Internet access the same way we look at the light bill today.
Finally, in regards to the Go-go stocks of the 60's, that period was an example of times that actually rivaled today's 'Net stocks for short term returns. If you can get ahold of University of Chicago's CRISP database, you can see the amazing performance of Xerox in that period. Of course, anyone who bought Xerox after 1965 would be losing money right now.
Gad, please stop me before I get more depressing. Click your heels together, repeat after me, "The stock market always goes up long term, the stock market always goes up long term, the stock market always goes up long term." I remember saying that to clients in the mid-80's and being met with dubious looks. I guess another worry of mine now is that most people now agree with me. |
