h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

I have just finished reading John Kenneth Galbraith's book - "A Short History of Financial Euphoria" and I have the following advice to give.

DO NOT BUY INTERNET STOCKS

The Internet has created a stock market bubble. The bubble WILL burst. It is not a matter of whether. It is a matter of when. The bubble is following exactly the same patterns of Tulipmania, the South Sea Bubble, and Wall St 1929. "Intelligent" investors think they will see the signs and get out before it happens. The lessons of history say otherwise. A stock market crash happens with few advance warnings. People think that nothing will happen because more "intelligent" people than ourselves (bankers, technology leaders, government leaders, economists etc.) are committing themselves to huge investments in "dot-com" companies. Again, the lessons of history say that this has all happened before, with the great and the good revealed as not so impeccable of character and logic.

Am I scare mongering? Consider two facts. 1) Most dot coms do not make any money, yet they have huge (sometimes billion dollar) market capitalisations. 2) The revenue base of most dot-coms is constantly being eroded, which means that their ability to make money in the future is becoming more and more questionable.

Nick Leeson said in his book "Rogue Trader" that making money was "actually" very difficult. Think about it. Only through hard work, perserverence and a lot of sweat will any of these companies become market leaders in the future. The laws of finance do not change regularly, despite what many people today may think.

CR