The Other Meltdown Connection

Does any one remember the meltdown of the dot coms on the NASDAQ in late 2000 and 2001?  Unless one forgets, that was also about Wall Street greed.  Technology stocks were popping up all over just as subprime mortgages were doing the same with the housing boom. 

 

Wall Street brokers and financial institutions were offering IPO's (Initial Public Offerings) on newly created dot coms that had no balance sheet, no record of earnings, no record of revenue and no prior record of experience.  Those dot coms were promoted by Wall Street and the public had faith in what they were hearing.  Wall Street caution in those IPO's and dot coms were gone with the wind. 

 

Wall Street was making money offering those stocks and selling them, just like they were making money lending to non banks who originated trillions of dollars in subprime mortgages and then bought those subprime mortgages and packaged them as bonds and other instruments and sold to investors, many overseas.  Wall Street was not concerned about the viability of the dot coms as they were not concerned about the financial health of the subprime borrowers.  Then all came tumbling down.  Greed was the driving force on both accounts.

 

The NASDAQ lost over 60% of its value because of the dot coms crash and investors in those stocks were devastated.  In the mean time the DJIA was loosing only about 3%. Not many dot coms there.  The American people need to adjust their thinking when it comes to investing their hard earned money.  Don't pay any attention to those on cable news who have shows concerning the economy and the financial markets.  They have a proven record of being impotent on the subject.

 

The Savings and Loan meltdown of the 1980's, the dot coms meltdown and the present financial meltdown of 2008 all had the same common denominator, greed, big time.