George Ball shared his perspectives regarding the current bear market, likening this scenario in the US stock market to the Dot-com crash that happened in the early 2000s.
He is the chairman of Sanders Morris Harris, an investment company based in Houston, Texas, in the United States that presently has US$4.9 billion in assets under management.
We have been reading many reports about a US stock market collapse, itself entering the bear market territory, and an impending recession in the United States and the rest of the world lately.
We think our readers also have similar experiences, and we want to share this update with them so that they will be enlightened further.
According to the news posted online by American multinational business magazine Fortune, Ball remarked that there is a very robust similarity between the Dot-com crash era and the bear market the United States is experiencing these days.
He cited that people would have thought that investors, broadly retail and professional, would have learned their lesson in 2000, though something strangely alike has transpired recently.
The investment company chairman pointed out that investors in both the eras when the Dot-com crash happened and today have clearly been willing to pay up for possible future earnings and market share gains.
He said this scenario is true even in business paradigms that have yet to prove themselves capable of turning profits.
Ball explained that there was a genuine, hugely mindless belief that a subset of investments would go up in price forever during the time when the Dot-com crash happened and in the present market run-up and decline this 2022.
He relayed that the reasoning, if there was any, did not have an authentic grounding in logic and metrics and depended on a very high rate of growth carrying on beyond any reasonable anticipations of the scale’s boundaries.
The Sanders Morris Harris chairman added that the “poisons” that ultimately led to the Dot-com crash then are similar to what markets are presently experiencing. He pointed out that something is growing very fast and would always expand quite rapidly.
Ball continued that the Greater Fool Theory then takes over, and investors utilize leverage. Next, the growth cannot be maintained at the extreme, and the leverage gets exposed. Finally, he said the time comes when the stock market crash comes about.
Ball remarked that such a scenario certainly applies in today’s technology stocks and has been true in cryptocurrencies. He explained that it was specifically evidenced by the price declines in completed special purpose acquisition companies or SPACs.
We appreciate Mr. George Ball’s analogy. We also discovered that he is concerned with the present bear market.
We learned that the Dot-com crash that happened some 20 years ago haunts the many seasoned Wall Street investors’ memories. This year’s US stock market collapse appears to be conjuring up some serious déjà vu from that event of the Dot-com bubble burst, which a brief yet painful recession followed.
The technology-heavy Nasdaq has fared even worse than the S&P 500 by nosediving more than 28 percent. Meanwhile, the S&P 500 has been down 19 percent since this year’s beginning.
We hope our readers, including investors and business owners, will take Mr. Ball’s caution. In this way, we can recover from the current bear market he likened to the Dot-com crash era sooner and never repeat the same mistakes.