Note: previous blog articles of this journey can be located via the right hand side bar.
A we reached the end of 1999, the paper profits were just becoming unreal and investors were buying into the idea that this one way trip would go on and on: you even had people in well-paid jobs that had become totally seduced by the technology/.COM story and had given up employment to become full-time investors; fortunately I never really got that feeling. The Sunday Times carried a regular feature entitled The Diary of a Day Trader featuring a chap who had quit his secure job during the .COM boom to become a full-time trader working from home. The Diary of a Day Trader was a must-read feature, chronicling the ups and downs of the journey of John Urbanek. Even people who had not bought a share in their entire lives were talking about the column on a Monday morning at work. The column was beautifully honest, “warts and all” and as time went by it was obvious that the new trading life was becoming very tough. Interestingly in his final column, he wrote "I am not throwing in the towel and will continue as a day trader, although somewhat older and wiser than when I started almost two years ago. I would not necessarily recommend that readers follow my lead. It is not an easy life – nor is it an easy way to make money"; Wise words that may he headed by any investor and as I recall there were many less fortunate folk who found the glorious new .COM road would not be paved with gold forever. For my part, I was becoming increasingly nervous at the altitude that my technology stocks were reaching but felt almost powerless to climb off the roundabout, it was surreal; the intoxication just overwhelming.
As the clock struck midnight on new-year’s eve 1999, I was at work completing the tape backup for our valuable laboratory information system, wondering what I was doing there on a new years eve playing service to what I perceived as the Y2K scam. I was also wondering just for long this gold rush could continue. Thankfully the drive home in the early hours of the first of 1st January 2000 proved uneventful; the traffic lights were all still working and as yet no aeroplanes had fallen from the sky: the millennium bug had been beaten; civilisation and the planet saved!
As for the question of how long this technology gold rush could continue, the answer came along in early 2000 with to my mind a watershed of the .COM bubble in the flotation of Last Minute.com. Lastminute.com floated at a SP of 380p and rose to over 500p in the first hour of trading; the demand was massive and the average punter was allocated 35 shares; what a crazy world. The company had a phenomenal valuation: the magic roundabout built on the edge of the cliff had to grind to a halt and that’s exactly what happened in March 2000. A friend, Bob and I were talking about the madness of the dot.com thirst and the departure from reality with the lastminute.com floatation; little did we know at the time that this was the signal for the end of the technology boom. What followed is now well-documented history as the decline in share price of these briefly loved stocks was about as fast as their rapid rise. Fortunately in the most part, I got out part way through the tumble down the cliff and whilst I had in today’s terms made very healthy gains, they were nowhere near as high as they appeared to be when we were at the top of the cliff. I sold, sold and sold until again my portfolio just had a couple of stocks remaining including a few Redstone’s; how could a company that sponsored the Wales Rugby team be anything but worthy? Yes, that Redstone reasoning of myself seeing the reassurance of a company sponsoring a national side was totally misplaced.
The main part of the decline or fall off the cliff took part over something like an eight week period commencing March 2000, with many IT stocks losing around 80% of their value. In fact, Lastminute.com continued falling for some months to come until it had lost 96% of the valuation it had reached on its first day of trading. For sure, anybody who invested during the late 90’s and early 2000’s will never forget those turbulent days.
Early 2001 became a time to reflect. What would I do now? I had made good profits so far on my journey and learnt a lot. Sadly not everybody was learning as they might; I had investment friends who continued to stay loyal to their technology stocks and refused to sell, living in a world of self-denial. My good friend Bob said to me “Fibernet touched £30 not so long ago and mark my words, it will get back there soon, this fall is only a temporary setback”: to his credit Bob was a very loyal chap he went all the way to the top with his stocks and for the most part stayed loyal all the way to the bottom!
It was definitely time to sit on my hands, protect a reasonable cash pile and take some time to think; what was this diversification stuff I once thought worthwhile. After my experiences to date, I felt comfortable in that I was learning all the time and probably after the .COM bubble burst I was becoming a touch more cautious but where would I go from here I wondered. What stocks may be a touch more predictable and safe? Hang on, those ex-building societies look interesting and pay a safe dividend and then, of course, there is always the banks; you can’t get much safer than that!
The journey continues.
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