Was It a Bubble, Or Was It Just Early?

One of the often used excuse for having ventured into something that didn’t materialize is “I wasn’t wrong. I was just early.” There is some truth to that statement although timing is every bit as important as the action itself. I’m seeing a number of things derided after the late 1990s stock bubble coming back as valid business models. Maybe they fit into this “wasn’t wrong, just early” category.

theglobe.com operated an online community. It went IPO in 1998 and the stock rose 600% on the first day. 3 years later it went bust. But now we have Facebook, which isn’t that different from theglobe.com. Had theglobe.com hung on longer, maybe we would’ve never heard about Facebook.

Webvan sold groceries online. It went bankrupt in 2001. Now we have brick and mortar grocery stores offering online ordering for home delivery. Google search “grocery delivery” returns Safeway, Albertsons, and a number of other stores offering grocery delivery services.

AllAdvantage paid people to surf the Internet. It ceased operations in 2001. Now six year later it’s back as AGOLOCO.

So was it a bubble or was it just early? For whatever it’s worth, James Glassman, the author of the infamous Dow 36,000 book, is still standing by his projection. Although he pushed back the year from 2005 to 2021! Was it a bubble or was it just early? That’s a good question.

More fun read: 2000 A Bubble? 2002 A Panic? Maybe Nothing! by Professor Matthew Spiegel, Yale School of Management. He asked if the 1929 peak was a bubble or if the 1932 selloff was a panic.

An investor buying at the peak [of 1929] and holding until today would have earned a compounded return of about 9.7% per year.

The article was written in Dec. 2002. I’m sure the 9.7% number is higher now. So maybe after many years we will find out the 2000 peak wasn’t a bubble after all. Perhaps just early.