This time it really is different!
I got rich in the dot-com bubble — for three months. Well, I should say richer. I didn’t actually get rich. And in the end, I got poorer. But I did catch the tail end of the bubble, and for a couple of months, I got the thrill of riding that tiger. It was kind of fun.
Back in 2000, Dow Jones switched their compensation plans, from a lump-sum bonus at the end of the year and a defined contribution plan, to a 401(K) with a company match and contribution at the end of the year. The new plan started on Jan 1, 2000. I’d never owned stocks before, and for three months, I remember going every single day to the plan’s website and watching the number rise.
We were actually giddy, we thought this was the best idea ever, we thought we were going to retire rich. The thing was going up exponentially, it seemed, every day. Of course, like so many other idiots, I was getting in at the top. But it felt great, right until March 10, 2000, the very top, the end of the ride. The bubble burst, my 401(K) cratered, and I learned a very valuable lesson.
The funny thing is, until I actually had money invested, I was extremely skeptical about the market. Kind of comes with the territory of being an editor. We all used to rail against the ideas floating around, that “this time it’s different,” that earnings don’t matter, that the Dow was going to 36,000. But once my own accounts started rising, well, well I was making money. I knew it was a scam. But still, I was making money.
But, in the end, it was all hype. Nothing was different. Earnings of course matter. And the Dow wasn’t going anywhere near 36,000. And, boy, the dot-com bubble was a simple matter compared to the financial meltdown of ’08. I know everybody’s kind of got disaster fatigue these days and is ready to accept almost any “truth” that’s being sold out there: that everything’s better now, job growth is going to explode on the scene, Tim Geithner’s a misunderstood genius.
But there are plenty of good reasons to remain cautious. Job growth has not appeared yet, and isn’t going to appear in any great numbers for a good long time. There simply isn’t any reason for employers to start adding hundreds of thousands of new workers, month after month. The states in these United States every day are finding themselves at the end of their financial ropes. And all Geithner did was throw an unlimited amount of money at the banks, because he could, because he ran the Treasury, then whitewash the whole thing with a rigged stress test.
Cripes, I could have done that.