Is this another tech bubble bursting?

Is that the screeching sound you hear? This is the stock market crash, driven by a crash in tech stocks: the overall market is down 18% this year, and tech stocks are down about 30%.

That voice is also a “I told you so” chorus of people comparing the bull market that investors enjoyed for many years with the internet bubble of the late 1990s – and who say things are only going to get worse. In the dotcom crisis that began in March 2000, technology stocks eventually plummeted nearly 80 percent. This is the kind of crash that can affect everyone, even if they don’t work in technology and don’t bet on stocks (or, more accurately, they don’t). Think betting on stocks).

And there are certainly plenty of similarities: Like the dot-com era, the stock boom, which began in 2009 and was huge during the pandemic, has been fueled in large part by very low to non-existent interest rates, making investors more interested in the companies that promised to deliver. Huge returns. And like the dot-com era, we’ve seen a lot of companies promising products and results they can’t achieve, like hydrogen-powered trucks.

But there are big differences between 2022 and 2000. Key factor: Unlike the dot-com era, many of today’s publicly traded tech companies are actual businesses – they make and sell things that people value, and usually make a profit by doing so. So while companies like Facebook, Google and Amazon have all seen their stocks plummet this year, that doesn’t mean their businesses are disappearing — just that investors no longer think their growth prospects are as compelling as they once were.

It’s also worth noting that while the tech industry employs a lot of people — an estimated 5.8 million in 2021, according to the Computing Technology Industry Association — that only represents about 4 percent of total US employment.

A key element in this comparison and contrast is the shrinking of the crypto bubble, which is separate but largely related to the general tech and stock bubble. On the other hand, the price of bitcoin and other crypto-related products seems to be fading away very quickly: last fall, the value of one bitcoin reached $67,000; Now it is worth about $28,000. On the other hand, if you bought bitcoin back in 2014, when it cost around $700, you are still in a good position today.

Key Questions for Crypto Watchers: Is this a complete meltdown, or is it just one of the many ups and downs that the tech world has experienced over the past decade? The question for everyone else: If cryptocurrency collapses, will it only affect people who have bought or used dogecoin, Bored Ape NFTs, or any other type of cryptocurrency — a group that supposedly represents 16% of Americans — or can it create “Contagion” can destroy the global economy? If we know, we’ll tell you.

Meanwhile, here are three charts that show some of the reasons why it looks like the 2000’s right now—and some of the reasons it doesn’t.

While you may have heard a lot about stock and stock trading in the past couple of years – in large part due to the explosion of trading encouraged by mobile apps like Robinhood – Americans are no more exposed to the stock market than they are. It’s been in the past: About 58 percent of the country owns some type of stock, whether it’s individual stocks or bundles of it through their 401(k)s and other retirement accounts. This isn’t much different from bubble era, but it’s also not the climax.

In the age of dotcom, if you want to invest in technology stocks, you have to look for tech stocks – and a lot of people have. But now you’re probably investing in technology even if you don’t want to. That’s because many of the biggest tech companies – like Google, Facebook, and Apple, with a combined market value of over $4 trillion – They now make up large parts of the big stock indices. Which means that relatively conservative investment vehicles, such as index funds managed by Vanguard and Fidelity, own large chunks of tech companies. So, even if your only exposure to the stock market is via a 401(k) or IRA, you are likely to be exposed to tech stocks.

One way to measure a stock’s relative risk is to measure the price-to-earnings (P/E) ratio – how much does a company’s share cost compared to its earnings? In the dot-com era, when it was entirely possible to create a public company with little revenue and no profit at all, P/E ratios were off the charts. Today, big tech companies routinely dump billions in profits, making ratios more conservative, and stock prices more permanent. One important out: Tesla stock, which made Elon Musk the richest man in the world, with the ability to fund a $44 billion bid on Twitter, is still trading at a nose-to-nose P/E of 100. If they come back to Earth, Musk would still be rich — But not to the same extent.

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