Lessons from the Tech Bubble

Author

The Idea Farm
June 02, 2024

Together With

“You don't get paid for being early; you get paid for making money.”

— Herb Greenberg

Research

Research Affiliates studies the internet bubble of the 1990's as a guide for how to think about the AI craze today. They share lessons for investors:

  • The most successful companies to emerge from tech transformations are often not the existing stars at the beginning.

  • Although a bubble will end in a bust, the mania generates capital investment that yields long-term benefits.

  • A fundamental approach with disciplined rebalancing can capture GenAI mania’s gains and mitigate risks in the bust.

Source: Based on data from Research Affiliates and Bloomberg. Includes HP Enterprise, which was spun out in 2015. * Amazon went public in May 1997 and eBay went public in Sep 1998. Returns are from end of first day of trading; market caps are from IPO valuation.

Aspect Capital highlights the attributes of trend following (adaptability, agility and resilience) and suggests it may be better to think of trend following as “unpredictability alpha” instead of “crisis alpha.”

Facts & Figures

Apple alone accounts for 3,000 of the 20,000-point rise in the Dow Jones Industrial Average since 2017. Link

Vitol, the world's largest independent oil trading company, has made more money in the last 3 years ($32 billion total) than during the past 30 years combined. That's ~$71 million each on average for its 450 trader-shareholders. Link

Related to the stat above, Javier Blas shared this chart of commodity-trading houses profits from 1998-2022 in his book, The World for Sale. Link

The S&P 500 is already 9.8% higher than the average forecaster thought it would be seven months from now. Link

As of May 21, 2024

30-year bonds have declined 45% since April 2020. Link

As of May 17, 2024

Value investing is alive and well outside the U.S. Link

As of May 24, 2024

Historical risk and return figures for stocks with various cash distribution policies. Link

As of September 30, 2022

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Podcasts

1/25/23 - 22 minutes

This is a fun episode about the origin story of Monopoly, how it relates to capitalism and the power of story telling.

5/1/24 - 44 minutes

Ken Griffin talks about the evolution of Citadel, his perspective on innovation and building a culture, and how to maintain resilience in a volatile economic landscape.

4/30/24 - 67 minutes

Lasry discusses the highs and lows of building a big investment firm, the evolution of distressed investing, and why sports is full of exciting opportunities.

What Else Is Happening