My summary of the historic madness of the past 2 years.
I'm gonna explode, everything has been TOO perfect.
The last 2 years have been straight out of a textbook
(and will be, in the future)
People quitting jobs to trade stocks.
Families budgeting in stocks gains as a given.
Like buying a 2nd car from assumed monthly stock gains.
Insurance salesman selling annuitues based on assumption of 20% annual returns.
People doing retirement projections based on assumption of 20% annual returns.
People buying stocks at ALL COSTS. (All money put into stocks would grow.)
Considered foolish to have any money not in markets.
Buy stocks with credit cards. (Make more than the 17% borrowing fee.)
People using home equity loans to buy stocks.
Don't pay back ANY debt, all money allocated towards market.
People wouldn't even SELL the stock when they NEEDED the money.
Instead, were taking margin loans using the stock as collateral.
Also, trying to delay capital gains.
This was also the undoing of stock option holders.
Convert options to stock. Then don't sell stock.
Stock craters, but still left with capital gains tax bill.
Stocks become the national passtime.
Dominate mass media coverage and water cooler conversation.
People discuss CSCO at office water coolers, instead of last nights Melrose Place episode.
CNBC played at bars, instead of sports highlights.
Local barber talking about stock portfolio, instead of politics.
All signs said: Stock market was a loaded boat, EVERYONE's in, there's no one left to buy!
Fake companies cashing in the hysterical buying.
Recurring peaking pattern in any trend.
Everyone cashing in with their version to sell. Creates a glut of supply. Causes the end.
Baseball cards in the 80's, at the peak, 10 new brands created each week.
Hair bands in the 90's, at the peak, 10 new bands released each week.
Boy bands, SUV's, Diva pop groups....
The flood of IPOs at peak, at the peak, 50 a week. All justified by the "new era".
Bull market ends in historic blow off mania peak.
Dozens of signs, plain as day, pointing to the end of stock boom:
Rising oil prices
Rising energy costs
Profits dropping
Record margin levels
Hairdressers giving stock tips
Record low cash levels in mutual funds
Record low dividend rates.
After the crash, the denial of end of the bull market.
People holding fake stocks till the bitter death.
The concept of bull market geniuses.
Stock fund managers and stock brokers who never really had a clue.
Were just right for the wrong reasons.
All incompetence was masked by bull market.
All crazy fees masked by bull market.
Everyone's a genius when every stock goes up.
No one cares about excessive fees when your making money.
Tip the dealer $100 when you win a $1000 hand. Who cares.
One giant chain reaction
Firms whose profits came from their own stock,,,,,
Firm owns a lot of its own stock. Stock goes up, so they report bigger profits.
So the stock goes higher, so they report even bigger profits.
Self-fuelling vicious cycle. Now, its a red death spiral in reverse.
Using your stock as currency, to pay employees, to buying other companies.
Firm whose sole business purpose if to hype their stock,
Instead of stock being a reflection of a profitable company.
Stocks were meant to give an investor part ownership of a company.
Not meant to be speculated on, bought for one price, sold for another.
Was meant to share in profits on a company, via dividends.
Crooked wall St. analysts hyping stocks that they underwrote.
Banks giving a buy recommendation, while dumping the stock behinds the scenes.
Money being created out of thin air.
Crooked investment banks pushing fake companies out the door in an IPO's.
Making tons of fees. Kickbacks on IPO allocations.
All the fake accounting practices coming to light.
* Fake revenue swapping, 2 firms pay each other $1mil. Pro fit/loss nets out to zero, but both firms claim $1 mil. in total revenues.
* Lending clients money to buy your services and booking it as profit. ala CSCO
Fake chip cycle upgrade path. No one ever needed all that chip power.
All a brilliantly engineered marketing conspiracy.
No one's buying anymore.
They probably had PIII850 chips in 1995.
And probably curtailed the release cycle,
In order to have people keep buying new ones every 6 months.
All the startups,,,,gold rush race to get an IPO and sell stock.
Job market bubble. New firms created daily in rush for stock IPO cashout.
Brain drain from traditional firms. Flush with money, crazy salaries and perks.
BMW leases, bring dog to work, dress down makes suits obsolete, etc etc
Firms spinning off their dotcom subsidiaries, to take part in "new era" valuation.
Then buying them back when the stock crashed.
Slew of stupid useless software tools as fronts for fake companies.
No one ever used these silly tools.
DSL/Broadband, it was never profitable, disastrous business model,
They spent $1000's per customer to sell a $49/mo. service.
Once NAZ crashed, no more incentive for VC's to start and fund dotcoms.
So existing dotcoms get no more money, run out of cash, and close up shop.
Web consultancies had burgeoning client list in all these new firms.
Then the client list evaporates overnight, so they follow suit.
Creates reverse brain drain,,mass layoffs, job market glut... |
