An analysis of the inflated business potential of the Internet.

This is a sceptical history of the internet/stock market boom. John Cassidy argues that what we have just witnessed wasn't simply a stock market bubble; it was a social and cultural phenomenon driven by broad historical forces. Cassidy explains how these forces combined to produce the buying hysteria that drove the prices of loss-making companies into the stratosphere. Much has been made of Alan Greenspan's phrase irrational exuberance, but Cassidy shows that there was nothing irrational about what happened. The people involved - fund managers, stock analysts, journalists and pundits - were simply acting in their own self-interest.

Why do stock and housing markets sometimes experience amazing booms followed by massive busts and why is this happening more and more frequently? In order to answer these questions, William Quinn and John D. Turner take us on a riveting ride through the history of financial bubbles, visiting, among other places, Paris and London in 1720, Latin America in the 1820s, Melbourne in the 1880s, New York in the 1920s, Tokyo in the 1980s, Silicon Valley in the 1990s and Shanghai in the 2000s. As they do so, they help us understand why bubbles happen, and why some have catastrophic economic, social and political consequences whilst others have actually benefited society. They reveal that bubbles start when investors and speculators react to new technology or political initiatives, showing that our ability to predict future bubbles will ultimately come down to being able to predict these sparks.

Seminar paper from the year 2012 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,3, Technical University of Applied Sciences Mittelhessen, language: English, abstract: The Dotcom bubble, also known as the ‘Internet bubble’ or the ‘Information technology bubble’ was a speculative bubble of stock prices of mainly American Internet companies during the time from 1995 until 2000 when many investors believed that a ‘new era’ was upon them. In only two years, the Internet sector grew over 1000% of its public equity and equalled nearly 6% of the market capitalization of the United States and over 20% of all public traded equity volume in the US. It had its peak on March 10, 2000 with a NASDAQ score of 5,048.62. This period was characterized by lots of establishments of companies in the Internet sector. They were called ‘Dotcom Companies’ because of the ‘.com’ in the end of an URL that comes from the word ‘commercial’. The bubble burst during the years 2000 until 2002 when the NASDAQ lost nearly 80% of its value, many companies like Pets.com failed completely and over $7 trillion in market value were destroyed. With this paper, the author tries to explain the rise and fall of Internet stock prices during that period. For this purpose, the general causes and characteristics of financial bubbles get described before the application to the Dotcom bubble follows. Additionally, some company examples and survivors and losers of the bubble like pets.com, Webvan or Ebay get introduced. Because the bubble mainly took place in the United States, the author will focus on American company examples and the American stock exchange.

A History of the Internet and the Digital Future tells the story of the development of the Internet from the 1950s to the present and examines how the balance of power has shifted between the individual and the state in the areas of censorship, copyright infringement, intellectual freedom, and terrorism and warfare. Johnny Ryan explains how the Internet has revolutionized political campaigns; how the development of the World Wide Web enfranchised a new online population of assertive, niche consumers; and how the dot-com bust taught smarter firms to capitalize on the power of digital artisans. From the government-controlled systems of the Cold War to today’s move towards cloud computing, user-driven content, and the new global commons, this book reveals the trends that are shaping the businesses, politics, and media of the digital future.

The presence of speculative bubbles in capital markets (an important area of interest in financial history) is widely accepted across many circles. Talk of them is pervasive in the media and especially in the popular financial press. Bubbles are thought to be found primarily in the stock market, which is our main interest, although bubbles are said to occur in other markets. Bubbles go hand in hand with the notion that markets can be irrational. The academic community has a great interest in bubbles, and it has produced scholarly literature that is voluminous. For some economists, doing bubble research is like joining the vanguard of a Kuhnian paradigm shift in economic thinking. Not so fast. If bubbles did exist, they would pose a serious challenge to neoclassical finance. Bubbles would contradict the ideas that markets are rational or work in an informationally efficient manner. That’s what makes the topic of bubbles interesting. This book reviews and evaluates the academic literature as well as some popular investment books on the possible existence of speculative bubbles in the stock market. The main question is whether there is convincing empirical evidence that bubbles exist. A second question is whether the theoretical concepts that have been advanced for bubbles make them plausible. The reader will discover that I am skeptical that bubbles actually exist. But I do not think I or anyone else will ever be able to conclusively prove that there has never been a bubble. From studying the literature and from reading history, I find that many famous purported bubbles reflect inaccurate history or mistakes in analysis or simply cannot be shown to have existed. In other instances, bubbles might have existed. But in each of those cases, there are credible rational explanations. And good evidence exists for the idea that even if bubbles do exist, they are not of great importance to understanding the stock market.

He covers the anti-trust case against Microsoft; the successes of eBay, Amazon, Yahoo, and Google; road-kills along the information highway such as the forgotten eToys; as well as the Enron implosion and other corporate scandals. After tracing this amazing story he concludes that the illegal practices and the ensuing USD7 trillion loss in equity markets slowed the Internet revolution but could not snuff it out, and with worldwide economic recovery e-business surges onward.