Why a huge crash happened to the worlds technology stock markets in year 2000?

Question

I've noticed that in the last 3 months in year 1999 a rapid increase in technology shares happened, then in the first 3 months in year 2000 a huge crash happened ?

Answer 1

Mass fraud. Companies were lying about how much they were making in order to keep up with the other companies that were also lying. Remember board members kept their jobs by keeping the stock holders happy. The stock holders were only happy if they saw explosive growth. if there was no explosive growth, they would take their money to a company that was saying they were experiencing explosive growth (even companies that were actually having losses).

Other companies were being created just to get on the IPO hype (basically issuing a company on the stock market just to kill the company and keeping the money they made on the initial purchase).

To make matters worse for Japan, the government was buying stock on losing companies to make them look like a better deal than they were (stocks kept going up, which attracted investors that wrongly thought the stocks would keep going up). Obviously these companies failed and the whole scheme collapsed.

In Australia brokers were churning on forged margins and prevented people from selling. Margins are basically a loan used to get more profit from smaller movements. Brokers were forging signatures of the holders' accounts (which made people with $1,000 accountable for $100,000 without their knowledge) and then using the buy to buy and sell a lot (buying and selling fees are how brokers make their money) and leaving their consumers with these large tabs. There were also ghost IPO where a few people would pretend to be a large company and then trick investors into giving them money.

Answer 2

March 10th, 2000 was the day the "internet bubble" popped. We may never see the NASDAQ or any other index increase (nor hopefully never see them drop) as much as March 10th, 2000 through 2003. The potential for the Internet was unknown. Companies started popping up on the 'net all over the place. Lots of companies thought that if they have dot-com in their name, their stock would increase. Online trading sites started popping up so people could buy and sell shares on their own for a cheaper price. Many people would quit their jobs, take their 401K money or refinance their homes to day trade stocks. The new internet economy caused people to disregard income statements and balance sheets when considering what company to buy. They dropped any consideration of P/E ratios and went to Price/Sales. Stocks were going up ONLY because people were buying them. It had nothing to do with EPS. The stock market became an example of "musical chairs" or mob mentality. Everyone tried to buy the shares that everyone else was buying. The trick was to not be the last one holding the shares when "the music stopped" or when everyone realized that the company was way over valued. Lots of companies may have had increasing revenues but eventually they'd have to start making profits. Amazon was one of those lucky companies that was getting way over valued and eventually was able to survive and become a viable company.

Answer 3

check wikipedia for internet bubble:

http://en.wikipedia.org/wiki/Internet_bubble


The "dot-com bubble" was a speculative bubble covering roughly 1997–2001 in which stock markets in Western nations saw their value increase rapidly from growth in the new Internet sector and related fields. The period was marked by the founding (and in many cases, spectacular failure) of a group of new Internet based companies commonly referred to as dot-coms. A combination of rapidly increasing stock prices, individual speculation in stocks, and widely available venture capital created an exuberant environment in which many of these businesses dismissed standard business models, concentrating on increasing market share at the expense of the bottom line. The bursting of the dot-com bubble marked the beginning of a relatively mild yet rather lengthy recession in Western nations.

Answer 4

Excess

Many dot.com's that had never yet earned a profit were vaulued at greater value than Blue Chips. What goes up unrealistically, must come down.