Today we are having a look at one of the Bubbles from history: The Dot Com Bubble! & its key factors of what caused it & what made it burst & exactly when....
So here we start....
Starting from the very beginning----
In the year of 1986,
The Internet was quite new but had gained popularity among people quite rapidly. So the Tech Companies were one of the well performing one's.
Now, after having a look around.... 'bout the Internet's popularity & its growing usage.... Investors thought that the Tech Companies are gonna pay off high returns in future because of their popularity & future potential (as predicted by the Investors!).
Now this was the very 1st phase of the bubble going on.... EXCITEMENT!
Investors were overly optimistic 'bout the returns the Tech companies had the capability to generate in future!
So the Investors just went WILD over ALL the Tech Companies & started Investing in their stocks!
-- Now, this was just the start.... as the Bubble had just started to form now!
But however the Investors were completely clueless of the Bubble!
Now, as per of Investors just Investing in Tech Stocks.... It brings us to the 2nd phase of a Bubble.... where the STOCK PRICES SKYROCKETS!
& Investors were still just investing in Tech Stocks.... regardless of the stocks becoming expensive now.... they just were sure enough that the returns would be higher than what they are paying for....
Due to this the Stock Prices became very much over valued & the Stock Prices we pushed to a much higher price than their actual value!
& to inform you the BUBBLE HAVE BEEN FORMED HERE!
>The Stocks of the Tech Companies literally doubled in prices within a few months!
>Many Investors were just investing in any Company without checking the fundamentals.
Investors were taking irrational decisions & just blindly beleived that "ALL OF THE TECH COMPANIES ARE GONNA PAY OFF HIGH RETURNS!"
Most of the Investors were just following what others were doing.... & weren't really focusing on the fundamentals of any Company.
These were just people who came in Share Market to make profit without being knowledgeable enough!
On the other hand; after noticing that the Tech Companies are getting a little too much of funding from Investors....
Many people started a Tech Business.... some of them were just ain't worth it but still they managed to raise a lot of funds from investors.
Many businesses weren't at all doing anything.... infact they were just simple websiyes made with the sole purpose to raise funds!
But the investors blindly went to invest in such Companies!
Things were just so crazy that absolutely no one was thinking of what can be!
But even such useless/pountless businesses raised Thousands of dollars from Investors!
Everyone was very happy & thought they'll soon start getting payed off!
Many invetsors who wern't investing in Tech Companies were getting criticized!
Warren Buffett who is one the gretaest investors of all time was criticized to not invest in Tech Companies.
But still he didn't invested in the Tech Stocks because he said that he didn't understood the Tech Companies!
Later.... this decision of Warren E. Buffett helped him avoid the losses!
Anyways so now as of such businesses/companies/just normal websites (i may say) raised funds which weren't really serious 'bout their businesses at all.... so they used the money carelessly on things that wouldn't really benefit the Company/Business in any manner.
Some investors noticed this & began exiting the Marketing.... IT WAS JUST A FEW PEOPLE.... THE BUBBLE IS KIND OF STARTING TO BURST NOW.... BUT IT HASN'T YET BURSTED! This is basically the 3rd phase of any bubble AKA the PROFIT TAKING PHASE!
This is the only phase where you can basically earn by participating in a Bubble!
But we just barely ever realize of when is it the time and when is it not! ~~cuz all it have got anything to do with is Investors behaviour & that is just unpredictable!
So, still the prices were very overvalued....
By the end of 1999....
Almost all the Investors began to realise how crazy things have been & it was not before they noticed that the returns they wanted to see are not really showing up.... this is the 4th phase of the BUBBLE REALIZATION & THIS IS WHERE THE BUBBLE BASICALLY BURSTS!
We know what comes after the realisation.... its panic & due to panic; Investors cash out.... they just don't wanna loose there money they invested & just wanna get out of the market, now.
So the investors now just tend to sell, sell, sell & sell.... which causes prices to fall dramatically within just a fraction of a few minutes!
It was a show of a few minutes carried out by years of Investors behaviour causing the prices to fall from the highest to the lowest!
The prices fell due to Demand & Supply.... the supply was way too high now while the demnad was not!
NOW THIS DOWNFALL MEANS THE BUBBLE HAVE BEEN BURSTED & THATS IT!
So The Dot Com Bubble OR The Tech Bubble started to burst from 1999-2000
Now, after this Tech Bubble many Tech Companies went bankrupt!
& new startups were also closed 'cuz .... the Companies were now facing a great difficulty to raise fund!
Almost all the Tech Companies were negatively impacted due to this bhbble burst and faced a loss....
As all the Tech Companies Share Prices had fallen to a much lower level now....
Companies like Amazon & Ebay.... were also greatly impacted by this Bubble Burst. But they managed to survive this Bubble Burst!
But there were many Companies who went bankrupt during that time!
Anyways; so thats all for today!
Thanks For Reading!
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