Remembering October 9th – A Golden Lesson From The Dot-Com Crash

The GoldSilver Team
OCT 9, 2023

Dear GoldSilver Readers,

October 9th might seem like just another day on the calendar. However, 21 years ago today, the NASDAQ-100 dropped to 1,114, marking a staggering 78% plunge from its peak during the Dot-Com mania.

While stocks collapsed, another asset quietly began its ascent, offering a glimmer of hope during the financial chaos. Over the following decade, gold soared over 400%, providing not just a safe haven, but also remarkable returns for those who sought its stability.

In today’s GoldSilver Nuggets, we revisit this defining moment in financial history...

But before we dive into that story, let’s take a look at the news...

U.S. Economy Added 336,000 jobs in September — The U.S. job market outpaced expectations in September. This helped strengthen optimism that the central bank will manage to guide us to a “soft landing.”

Interest Payments Exceed Defense Spending — The US government is currently spending more to pay interest on its $33 trillion national debt than it does on national defense, per the US Treasury.

Ray Dalio Sees a U.S. Debt Crisis Coming — During an interview with CNBC, Ray Dalio said, “We’re going to have a debt crisis in this country... How fast it transpires, I think, is going to be a function of that supply-demand issue, so I’m watching that very closely.”

A Surge in American Debt — Delinquencies on auto loans, credit cards, and consumer loans have reached a ten-year high. As interest rates rise, experts predict further financial strain for many consumers.

Gold Rises After Attack on Israel — The precious metal gained as much as 1.2% on Monday as financial markets anticipated volatility in the wake of the unexpected attack by Gaza militants.

Shocktober - The Scariest Moments in Financial History

The Rise Of Dot-Com Mania

Classic Sitcom Style Flashback – It’s the late 1990s and everyone you know is talking about this new thing called the “Internet.”

Your friend’s neighbor’s cousin just invested in shares of Qualcomm and made a fortune overnight. The stock alone soared by an unbelievable 2,619% in 1999. And it wasn't alone. Over a dozen large cap stocks rose 1,000% that year.

By March 2000, the NASDAQ, a stock market index filled with these tech companies, had shot up an eye-popping 800%. It peaked at 5,048.62 on March 10, 2000.

People were so caught up in the frenzy some folks actually quit their day jobs to become day traders. Yep, Joe from next door, who used to be an accountant, was now trying to ride the stock market wave from his living room.

The Dot-Com frenzy has eerie parallels with the recent crypto mania. Back then, anything with ".com" was a sure bet. Fast forward, and it felt like anything blockchain-related was a golden ticket. Investors were eager to invest, at any valuation, without truly understanding what they were investing in.

History has a funny way of repeating itself, doesn't it?

But here's the thing: while some of these dot-com companies had real plans and real potential, many were just riding the hype and IPO-ing as fast as possible. And as we know, what goes up must come down.

This drastic debasement led to rampant inflation, eroding the Denarius’s purchasing power and causing prices everywhere to soar. The Roman populace lost faith in the currency, and the once-thriving Roman economy began to falter.

The Fed Steps In...

While the Dot-Com mania reached a fever pitch, Alan Greenspan, then Chair of the Federal Reserve at the time, decided to raise interest rates several times. Low interest rates helped facilitate the bull market in stocks, and many believe this reversal was the pin that popped the dot-com bubble.

By April 14, 2000, the NASDAQ had taken a nosedive, dropping -25% in just a week. By June 2000, many dot-com companies were tightening their belts and slashing their ad budgets. On November 9, 2000, Pets.com, a much-hyped company that had backing from Amazon.com, went out of business only nine months after completing its much-anticipated IPO.

In less than a year, most Internet stocks had declined in value by 75% from their highs, wiping out $1.755 trillion in value and erasing nearly all the gains made during the bubble. Low interest rates helped fuel the bubble. When the Fed came in and raised rates, the economy couldn’t handle the shift and the bubble burst – but that’s just the reality of our central banking system.

Gold Offers Hope After The Bubble Bursts

With so many stories of overnight millionaires, the allure of the stock market completely overshadowed traditional assets like gold. As the bubble burst and the Federal Reserve began slashing the federal funds rate again, gold embarked on a remarkable rally.

Price Of Gold vs Large-Cap Tech Stocks (QQQ)

As the NASDAQ plummeted and investors panicked, gold quietly began to gain steam. Over the next three years, its price rose 35% – that was just the beginning...

Over the next decade, gold rose over 400%.

Gold’s performance following the Dot Com crash serves as a reminder that when financial storms hit, it’s wise to own some gold to steady your investment portfolio.

Gold goes beyond just a store of value. Gold actually serves as a hedge because it is negatively correlated with most other major asset classes. When they fall, gold tends to rise.

History shows that gold can often shield your portfolio against the worst events you’re likely to encounter.

If you want to add gold at today’s prices, then consider InstaVault. You can buy gold (or silver) in increments of your choosing, that can be converted to the whole product of your choosing. Once you have enough for an entire bar or coin, you can choose to have it delivered or stored in our world-class vaults.