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April 29 2015

Remember the dot-com bubble?

If so, you’ll appreciate this week’s notable event: The NASDAQ Composite Index, which includes a fair number of technology stocks, transcended its previous high (set in March 2000). Share values in the tech sector gained 4 percent last week, according to Barron’s, as major players in the space delivered better-than-expected earnings results.

The performance of technology stocks has some wondering whether this tech boom will be like the last one. In the go-go 90s, technology start-ups attracted hundreds of millions in venture capital funding. Some, like not-very-memorable fashion retailer Boo.com, burned through $135 million of venture capital and went belly up the year after it launched. Others, like TheGlobe.com, a social network service with no earnings, went public in 1998 with a target share price of $9. Investors paid as much as $97 a share during the first day of trading. By the end of 2000, the stock price was worth less than a dollar a share.

Things are different this time around, according to Financial Times, largely because a lot more economic activity takes place online today. About $50 billion is spent on online advertising in the United States (compared to $8 billion 15 years ago) to reach an audience of three billion people (compared to 400 million in 2000). The business paradigm has changed, too, according to Financial Times:

“This time around, many [companies] are being built to be sold to one of a handful of cash-rich acquirers… in the consumer internet markets, or… in enterprise software. In fast growing fields such as artificial intelligence, backers of more mature start-ups complain about the excess of early-stage venture capital flooding in, from investors hoping to sell out quickly to one of the giants.”

The Dow Jones Industrial Average and the Standard & Poor’s 500 Indices showed gains last week, too.

Sources:
http://online.barrons.com/articles/stocks-climb-2-as-nasdaq-tops-15-year-record-1429934540?mod=BOL_hp_we_columns
http://www.businessinsider.com/where-are-they-now-the-kings-of-the-90s-dot-com-bubble-2013-10#boocom-founder-ernst-malmsten-once-said-after-the-pampered-luxury-of-a-lear-jet-35-concorde-was-a-bit-cramped-2
http://www.businessinsider.com/where-are-they-now-the-kings-of-the-90s-dot-com-bubble-2013-10#the-globecoms-stephan-paternot-was-known-as-the-ceo-in-the-plastic-pants-after-he-was-filmed-in-a-nightclub-saying-got-the-girl-got-the-money-now-im-ready-to-live-a-disgusting-frivolous-life-4

  • Data as of 4/24/151- WeekY-T-D1-Year3-Year5-Year10-Year
  • Standard & Poor’s 500 (Domestic Stocks)0.0180.0290.1270.1560.1180.062
  • Dow Jones Global ex-U.S.1.78.81.87.33.33.7
  • 10-year Treasury Note (Yield Only)1.9N/A2.723.84.3
  • Gold (per ounce) -1.7-1.4-8.4-10.50.510.6
  • Bloomberg Commodity Index-0.2-2.6-26.5-9.7-5.6-4.3
  • DJ Equity All REIT TR Index0.92.31813139

*Indices are unmanaged and investors cannot invest directly in an index.
*Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
*S&P 500, Gold, Dow Jones Global ex-Us, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend).
*The DJ Equity All REIT Total Return Index does include reinvested dividends.
*All investments involve risk – coins and bullion are no exception. The value of bullion and coins is affected by many economic circumstances, including the current market price of bullion, the perceived scarcity of the coins and other factors. Therefore, because both bullion and coins can go down as well as up in value, investing in them may not be suitable for everyone. Since all investments, including bullion and coins, can decline in value, you should understand them well, and have adequate cash reserves and disposable income before considering a bullion or coin investment.

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Bart A Zandbergen, CFP® is a Registered Investment Advisor with Optivest, Inc and a Registered Representative with Gramercy Securities, Inc. Investment advisory services are offered by Optivest, Inc. under SEC Registration and securities are offered through Gramercy Securities, Inc., member FINRA & SIPC, 3949 Old Post Road, Charlestown, RI, 02813, 800-333-7450.

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