Era 07 · 2000 — 2002

Dot-com Crash

Peak to trough

−78% over 31 months

Pulse cycle

4.5s

Between 1995 and March 2000, the Nasdaq rose more than fivefold. Any business with a .com in its name could raise money on a spreadsheet. The thesis was real — the internet would reshape the economy — but the valuations were a different thing entirely. Pets.com, Webvan, Kozmo, eToys. When the cash ran out, it ran out everywhere at once.

Events in this era

Mar 10, 2000

Nasdaq peaks at 5,048

On March 10, 2000, the Nasdaq Composite closed at 5,048.62, up 109 percent in a year. The index had more than quintupled since 1995. Within months it was cut in half. It bottomed at 1,114 in October 2002, down 78 percent peak to trough. The Nasdaq would not close above its March 2000 level again until April 2015, fifteen years underwater. Pets.com, which raised $82 million in its February 2000 IPO, liquidated nine months later. Most of the companies that went public in 1999 no longer existed by 2003.

Peak of the first internet bubble

2001 — 2002

Capitulation and survivors

Enron and WorldCom collapsed into accounting scandals. The Nasdaq bottomed at 1,114 in October 2002 — down 78% peak-to-trough. But a subset of the era's companies survived and eventually dominated: Amazon, eBay, Cisco. The bubble produced both the largest losses and the most valuable businesses of the coming decade.

Bottom at Nasdaq 1,114 (−78% from peak)

Jul 2, 1997

Asian Financial Crisis

On July 2, 1997, the Bank of Thailand was forced to abandon the baht's peg to the US dollar. The currency lost more than half its value within six months. The collapse spread by capital flight to Indonesia, South Korea, Malaysia, and the Philippines over the following year. The IMF organized rescue packages totaling roughly $118 billion. Indonesia's rupiah lost 80 percent of its value; the country saw food riots and the fall of the Suharto regime. South Korea's KOSPI fell 75 percent. The crisis briefly threatened to take Russia and Brazil with it before US Federal Reserve interventions in 1998 ring-fenced the contagion.

$118B IMF rescues; KOSPI −75%; Suharto falls

Dec 2, 2001

Enron bankruptcy

Enron Corporation filed for bankruptcy with $63.4 billion in assets, the largest US bankruptcy at the time. The collapse revealed that a supposedly 'old economy' energy company had been using off-balance-sheet special purpose entities and mark-to-market accounting to fabricate earnings for years. The dot-com-era looseness had extended well beyond technology.

Sarbanes-Oxley passed within 9 months

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