The Next Big Investment Trend

Notes From The Field By Simon Black

October 9, 2019  San Juan, Puerto Rico

The Next Big Investment Trend Is On Sale Right Now

In July 1994, an ex-hedge fund VP left his cushy Wall Street job and started a new company called Cadabra, Inc.

He wanted to capitalize on an emerging trend that was called the “Information Superhighway” back then, what we now know today as the Internet.

Cadabra was an early ‘dot-com’ company. But as more and more people started accessing the Internet in the mid-1990s, the number of dot-com companies exploded.

Before long, there were countless entrepreneurs raising billions of dollars and taking their dot-com companies public.

Most of these companies were losing tons of money and had no hope of ever turning a profit.

But investors didn’t care. The Internet was the next big thing, and the stock prices of even the stupidest dot-com companies were soaring to record highs.

The bubble eventually burst. Investors collectively lost more than $5 trillion as the share prices of dot-com companies plummeted. Most dot-coms went out of business altogether.

Cadabra was one of the few dot-com businesses that survived the crash. But by then, of course, it had already changed its name to Amazon.

This is the nature of just about every major emerging investment trend.

It starts in a quiet stealth phase where only a handful of people even know the opportunity exists.

It then slowly builds momentum as savvy investors and fund managers catch on. And then it eventually becomes mainstream and turns into a giant frenzy.

Finally, just like investor euphoria sent prices to irrational highs, the bubble ultimately bursts, investors panic, and prices crash to irrational lows.

At the end of the cycle, sanity is finally restored, and a handful of Phoenixes rise from the ashes.

That’s what happened with the dot-com bubble. And we saw this play out recently with crypto as well.

Ten years ago, nobody even knew what Bitcoin was. Only a handful of very technical people had heard of it, let alone understood it.

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