Second Thoughts on The Flameout

It was the spring of 2000 and irrational exuberance was in the air. Between the summer of 2000 and summer of 2001, the “new economy” of the Dot-Com era deflated, causing the venture-capital money which drove it, to dry up.

This week’s readings give the impression that venture capitol money fled the economy and hasn’t returned. That’s not the case. It is just that people who have vast sums to invest are investing in things that can show they have the chance to become profitable. That wasn’t (at all) the case during the dot-com heyday.

It must be pointed out that many of the VCs that invested in such grand ideas as Kozmo and Webvan were often using “paper wealth” from their cashing out on previous dot-coms before they, themselves, flamed out.

How far did things fall? Well, as an exercise, myself and three others split $1 million in (imaginary) investments in Nasdaq stocks as a fun exercise to see which one of us got “wealthiest” from the rise in the value of their portfolios.

My $250,000 “investment” on Tuesday afternoon was worth $20,908.63. That’s 8.35 percent of its original value. It doesn’t help that 3 of the stocks I picked no longer exist. The bright spot is that 6 of the stocks still do.

By the way, the volume of the Nasdaq on Tuesday was 2,755.39 while the Dow Jones IA was over 12,100.

I guess real economy still trumps the virtual one.