Fears of Dot-Com Crash

The L.A. Times reports:

The current run-up does differ from the late-1990s bubble that began to implode in 2000, wiping out within two years $5 trillion in paper wealth on Nasdaq, the stock market on which the shares of many tech companies are traded. The market value of Nasdaq companies peaked at $6.7 trillion in March 2000 and bottomed out at $1.6 trillion in October 2002. It has since rebounded to $3.6 trillion.

One key difference is that the volume of venture investment is much lower than it was during the first Internet boom's height. The amount invested in the first quarter of this year was just one-fifth the $28.1 billion spent in the first quarter of 2000, according to PricewaterhouseCoopers' MoneyTree report, which tracks venture investment.

Also significant is the lack of investor appetite for initial public offerings. Unlike the last round of online exuberance, small investors aren't likely to buy shares in an online pet store with a sock-puppet spokesman.

And the range of companies sprouting this time is narrower. In the 1990s, entrepreneurs tried adapting any number of business ideas to the Web. Now, the focus is more on free services supported by online advertising, which has been growing sharply.

Some investors argue that there won't be another dot-com implosion, that the investment boom in online media companies is part of the natural ebb and flow of venture capital: Money plows in to unproven start-ups, winners emerge and investors move on to the next popular collection of start-ups.

We doubt the NASDAQ is going to take out 5000 anytime soon.