I have spent a lot of time studying the science and technology bubble in US stocks. In the past period of time, I have written a number of articles, such as "Choice in a Bubble", "some misunderstandings about a Bubble" and so on. Today, while closed at home, some research reviews are summarized as follows:

I. the four stages of the emergence and bursting of the science and technology bubble.

The bubble of science and technology should start from1995The year has already begun, from1995Arrive at the beginning of the year2002年10Monthly complete process duration7In 2008, it was divided into four stages.

Phase I: 1995 to October 1998. At this stage, the United States came out of the previous Iraq war and economic recession, US stocks entered a new round of rise, and the Clinton administration put forward the "Boston Expressway Plan", which is of great significance to the later technology stock market. At this stage, the NASDAQ rose steadily, but the overall increase was on a par with the Dow Jones Index, which represents the traditional economy.

Phase II: October 1998 to December 1999. From June to October 1998, the financial crisis in Southeast Asia intensified and began to spread to US stocks. The Russian debt crisis and the subsequent collapse of long-term capital management companies led to a brief decline in US stocks. Since then, U. S. stocks began to rise again, but at this stage the NASDAQ far outperformed the Dow.

Stage 3: December 1999 to March 2000. This stage lasts only three months, but it is significant, as the Dow is down 15% and the NASDAQ continues to soar 30%. If in the previous stage, the Dow Jones and the old economy only rose less and grew slowly, then it fell at this stage. So this stage is the most stressful time for value investors.

Stage IV: March 2000 to October 2002. This is the stage of bubble bursting and liquidation. From the high on March 10, 2000 to the low on October 9, 2002, the NASDAQ fell 77.9%, while the Dow Jones Index fell only 26.6%. Many value stocks rose against the trend.

Therefore, from 1995 to 2002, value stocks and technology stocks experienced four stages: rising together, falling behind, rising and falling, and jumping and rising. Finally, from January 1, 1995 to October 9, 2002, the NASDAQ rose 49.8%, while the Dow Jones Index rose 89.8%.

Among these four stages, the third stage and the fourth stage are the most worthy of study. In the second stage, value investment has lagged far behind, but after all, there are still absolute returns and self-comfort.What is really collapsing is the third stage. Value investment not only goes up but also goes down, and there is no chance to kneel on the ground and eat soup.In the fourth stage, the bubble burst, but this was seen in hindsight. In the process, there are many investors continue to copy the bottom, NASDAQ has several times more than 30% anti-pumping!

A moving passage from Dreyman's "reverse Investment Strategy" is excerpted as follows:

Although we have performed well over the past few decades through reverse investment strategies, we are still disappointed that reverse investment strategies have not outperformed the market in some years. Many people will pursue this kind of impossible thing (meaning outperform the market average every year) and often make some very bad decisions.

For example, in 1998-1999, growth stocks significantly outperformed value investments. during that period, value fund managers slightly outperformed the market, but growth stocks significantly outperformed the market, and reverse investment strategies underperformed for several years. Some investment advisers and clients are starting to argue that value investing is dead. Many people say that value investing did well in the past, but it is no longer useful now.

The gap continued to widen in the first two months of 2000, when Fidelity replaced George Vanderheiden, the best value fund manager, with a growth stock investment team in early 2000. Vanderheiden, who has worked for Fidelity for more than 20 years and manages three funds, has managed $7.2 billion in Fidelity Destiny 1. I (Dreyman himself) managed a $4 billion reverse investment fund, and holders switched to popular internet fast-growth funds, and my fund shrank by 50 per cent. The performance of reverse investment is also worse than I have ever seen. At that time, I wondered how many years it would take me to catch up with the Internet stocks in the soaring NASDAQ market.

The answer is not years, but months.Since March 2000, the Internet bubble began to burst and the prices of Internet and high-tech stocks began to plunge. At this point, my Dreyman value management reverse portfolio and securities funds began to soar. By the end of 2000, my portfolio was up 40%, while the S & P 500 was down 9%. In nine months, we caught up with the gap between 1997 and 2000, and made more money. A few years later, the wall street journal published an article calculating that Fidelity's investment portfolio would have survived the bursting of the bubble without replacing the Vanderheiden, but the fund lost 40 per cent under the new growth team.

Second, the performance of individual stocks

If we make an in-depth analysis of individual stocks, we will feel more deeply.

Financial stocks represent traditional value stocks and technology stocks are represented by software and computer services. graphically, the gap has widened since 1995, but it has not widened since 2002. Wells Fargo & Co's share price fell from 21.7 on January 1, 2000 to 18.16 on March 13, and then rose to 31.64 at the end of the year. Mobil Oil fell from 20.07 at the beginning of 2000 to 18.26 on February 29, and then rose to 25.08 at the end of the year. Berkshire shares nearly halved from March 1999 to March 2000, and have since risen all the way up.

At the other end, the share prices of many technology stocks plummeted and did not hit record highs until many years later. The high point of Microsoft Corp retreated 70 per cent, and the share price did not reach a new high until 14 years later; Amazon.Com Inc withdrew 95 per cent and it took a decade for Amazon.Com Inc to reach a new high; INTEL withdrew 83 per cent to reach a new high in 18 years, and Cisco Systems did not hit a new high until recently.

These companies are still good companies, may be survivors, those unfortunate are gone directly, the question is how do we know in advance who is the lucky one?

Three know and one don't know about bubbles

Bubbles and crises are twin brothers, which often occur in the history of human finance. They may appear much more frequently than mathematical calculations, and are related to human greed and fear. Throughout financial history, three of us know about bubbles and one does not know about bubbles.

We can tell if this is a bubble, we can know the level of the bubble, we also know that the bubble is doomed to burst, and we know the path after the burst. But we don't know when and in what form the bubble will burst. It is the unknown problem that prevents us from participating in the bubble, because there is no way to「Not only enjoy the bubble, but also get out」。

IV. Various forms of sentient beings

In this bubble, there are all kinds of people, except for some people, the three Daniel are the most worth pondering.One is Robertson of the Tiger Foundation.He always took a confrontational approach and finally left the game sadly before dawn. The last letter he wrote to the customer has been sad to read so far.This article is so well written that I only have the following excerpts from the full text:

In May 1980, Thrope Makenzie and I set up the Tiger Fund with a capital of US $8.8 million. Eighteen years later, the current year's US $8.8 million has grown to US $21 billion, an increase of more than 259,000%. During this period, the annual return of fund holders after deducting all fees is as high as 31.7%. No one has a better score.

Tiger funds have performed poorly since August 1998. Fund holders also responded positively-redemption of the fund. This is understandable. During this period, the redemption amount reached 7.7 billion US dollars. The wisdom of value investment is challenged. The redemption of the holders not only erodes our earnings, but also puts us under great pressure. And we don't see any sign that it's coming to an end. What exactly do I mean by "I can't see the end of the line"? What is the "end"? "end" actually refers to the end of a bear market in value stocks; it means that investors understand that no matter how the stock market performs in the short term, a return of 15 to 20 per cent is good. The "end" can therefore be explained as follows: investors are starting to abandon speculative short-term investments in favour of abandoned shares that are more secure and have good past returns.

At present, many people talk about the new economy (Internet, technology and telecommunications). It is true that the Internet has changed the world, the development of biotechnology is amazing, and technology and telecommunications have also brought us unprecedented opportunities. Speculators preach: "avoid the old economy, invest in the new economy, and ignore the price." "this is the investment mentality seen in the market over the past 18 months.

I have said on many occasions in the past that the key to the success of the Tiger Fund over the years is our persistent investment strategy of buying the best shares and shorting the worst shares. In a rational environment, this strategy works very well. However, in an irrational market, profits and reasonable stock prices are ignored, preferring speculation and Internet stocks to become dominant. We think that such logic is not worth mentioning.

Investors are chasing shares in technology, Internet and telecommunications for high returns. This frenzy is growing so much that even fund managers are forced into the game to create a pyramid of Ponzi that is doomed to collapse. Sadly, in the current environment, the only way to achieve short-term performance is to buy such shares. The process will continue until the pyramids fall. I am absolutely confident that this frenzy will pass sooner or later. We've been there before. I am still confident that value investment is the best, although the market is not buying it now. This is not the first time value investment has suffered a setback. Many successful value investments did poorly between 1970 and 1975 and 1980 / 81, but ended up making a lot of money.

It is difficult for us to estimate when this change will occur. I have no experience at all. What I know is that we will never risk investing everyone's money in a market that I don't know at all. Therefore, after careful consideration, I decided to send all the money back to our investors-that is, to close the Tiger Fund. We have cashed out most of our investment and will return the assets in accordance with the methods described in the annex. I would like to take this action earlier than anyone else. In any case, the past 20 years have been quite pleasant and fulfilling. Recent adversity cannot erase our past achievements. Since its inception, the Tiger Fund has grown 85 times (after all expenses), which is more than three times that of the S & P 500 and 5.5 times that of Morgan Stanley Capital International Global Index. The most memorable thing about these 20 years is the opportunity to work closely with a unique group of colleagues and investors.

Whether it is prosperity or adversity, win or lose, every time I say something, it is true to me and to all the staff of the Tiger Fund. Let us sincerely thank you all here!

This letter was written on March 30, 2000. In fact, looking back, the peak of the Nasdaq bubble appeared on March 10, that is to say, the bubble has entered the stage of bursting and the dawn that the tiger fund has been waiting for has come. But the tiger fund is still liquidated.

The second character to be analyzed is Druken.·Miller.This guy is definitely a big shot. I even think he's better than Soros, but he doesn't like the spotlight very much. But in the end, he could not resist the temptation to fall behind (see the discussion in the Book of Poor Charlie), defected at the last minute, and finally left the field sadly.

The last character is Buffett.In the summer of 1999, time magazine openly humiliated Buffett on its cover: "Warren, what went wrong?" "but Buffett gave a wonderful public speech in Sun Valley in the summer of the same year, but it was too long to list here, so you can search the Internet.

Although the dotcom bubble is over,20However, this period of history has left us with great inspiration and reflection, which is worth reviewing.The purpose of our study and review of history is to gain something and avoid repeating the same mistakes. It is undoubtedly the most cost-effective thing to use the lessons of others to pay tuition fees. But Hegel tells us that the only thing people have learned from history is that they learn nothing. This may also be the root cause of the continuous generation and fall of bubbles.