Tech stocks are going crazy? Check
IPOs are on fire? Check
Retail day-trading is going bananas? Check
People are proclaiming we’ve entered a “new” economy? Check
Warren Buffett is getting mocked relentlessly? Check
Investors are throwing money at unproven business models with no profits? Check
Value stocks are getting crushed by growth stocks? Check
Small cap stocks are getting left in the dust by large cap stocks? Check
This is a description of what went during the insanity of the late-1990s dot-com bubble…and what’s happening in 2020.
Except this time it’s not happening during one of the biggest economic booms in history but during a pandemic where millions of people have lost their jobs and hundreds of thousands of people have died.
I never would have expected to see a day-trading boom that rivaled the dot-com bubble just two decades later just like I never would have expected to see an economic crisis dwarf the Great Financial Crisis just a decade later but here we are.
And a tech-stock day-trading boom in the midst of an economic/pandemic crisis isn’t even close to the only new cycle we’ve seen spring up this year:
- We saw the fastest bear market from all-time highs to a 30% loss in history.
- Oil prices went negative.
- Mortgage rates are at record lows.
- Gold is breaking out to new all-time highs.
- Long-term government bonds are up more than 30%.
- The real estate market is entering beast mode.
- Trillions of dollars in monetary and fiscal stimulus came online in record-breaking time.
- Millions of people were forced to work from home all at the same time.
- Ecommerce experienced a decade’s worth of growth in the span of 3 months.
I’m sure I missed plenty more because so much has happened this year that it’s hard to keep it all straight but we’ve experienced like 12 different long-term cycles all compressed into the span of 7 months or so in 2020.
The reasons for all these wild happenings during the same year are obvious but the biggest reason these things are happening so fast is because technology is speeding up the pace of everything.
Everything is instantaneous now — good news, bad news communication channels, socializing, the spread of information, market moves, trading, buying stuff, television, movies and the list could go on.
Almost every choice you make these days is a snap decision because there is always something else competing for your time.
People would have been bored if this type of shutdown would have occurred in the past but the technology didn’t exist where you could simply trade stocks on your phone with the swipe of a finger.
And people surely would have kept buying necessities in the past even during a pandemic but it would have been impossible to keep buying so many material goods without Amazon shipping them to your door in less than 24 hours.
The real estate market would have been ground to a halt had this happened in the past but you can now look at thousands of homes from the comfort of your couch so the housing market is doing better than ever.
Technology has removed so many frictions people throughout history have had to deal with that it’s amplifying human nature. We are still the same emotional beings we’ve always been but now those emotions aren’t given a chance to breathe.
Technology is both a blessing and a curse.
It makes our lives easier and more efficient in countless ways. But it also invites misinformation, irrational exuberance and the spread of emotional responses at a frightening pace.
Technology has the ability to shrink cycles into months or weeks that would have taken years or even decades to play out in the past.
The only thing that rhymes when it comes to history is human behavior. But that behavior is now happening at a breakneck pace because technology has sped up nearly everything we do.
Patience is a virtue no one has time for anymore.
What Good is History When Dealing With an Unprecedented Crisis?