Forex

The long bull market of the 1990s spoiled investors and made us overconfident
in our stock picking abilities. We did not understand risk.
Now that the bubble has burst and we have seen that the stock market
moves in more than one direction, we realize that it’s not easy to
be a successful investor, to beat the averages, or to outperform the indices
consistently. The stock market was manic during the late 1990s.
Exhibit 1-1 shows the blastoff and then the plummet of the stock market
averages over the past five years.
When the stock market soars, cocktail party chatter centers on hot
tips and inside information. As Martha Stewart can attest, that information
is sometimes true—and in the end, incredibly costly! Stock
market touts hype dozens of once-in-a-lifetime opportunities. Every
business day on CNNfn and CNBC, promoters and analysts push the
current new, new thing—the next Starbucks or Krispy Kreme. Beware,
place a hand on your wallet, and hold on! The hype associated with
former hot stocks (such as Internet Capital Group once at $200.94—at
$0.36 at the end of 2002, Corning down from a high of $75 to $3.31 per
share, and JDS Uniphase once at $140.50, now $2.47) propelled their
prices to such high levels that they were grossly overvalued. As an ex-ample, look at Exhibit 1-2 to see the five-year performance of the stock
of ICGE.
The prices of many stocks during the late 1990s defied the laws of
gravity. It’s important that you understand that what goes up without
reason eventually must come down. At one point in 2000, the market
equity (shares outstanding times stock price) of ICGE was more than
$50 billion, even though its book value was negative, and JDSU