One by one, the covid induced tidal waves of excesses have been swept away. Down is the NASDAQ by some 35%, crashed have all the cryptocurrencies, and even Tesla has lost three quarters of its value while Elon sorts himself out with the extremists on Twitter.
History suggests that once bubbles have deflated, they never come back. Tulips are not selling at €700,000 (in today’s money) anymore, Tokyo’s imperial palace is no longer worth more than all of California, and a one bed flat in Chelsea can now be had for less than £10 million (just kidding).
However, there are notable exceptions. Lest we forget that Amazon was down 90% in 2002 and still seems to be going strong. Clearly, the internet was all it was hyped to be, we just struggled to put a fair value on a world where we stare at our screens for more than 10 hours a day.
The key driver of what constitutes utter folly from an extremely good investment, is whether or not there truly is a new paradigm shift. Airplane travel? Check. Television? Check. Personal computers? Check. Pictures of monkeys on a digital token? Not so sure.
As ever, it’s not what you do, it’s how much. There is absolutely nothing wrong with speculating on the next big thing. The trick is not to get greedy and bet the ranch in hopes of changing our lives forever. A $1000 investment in Amazon in 1997, would be worth $2m today. That’s enough for a steak at Salt Bae, and unequivocally the end of all our ambition.
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