by Simon Black, SovereignMan:
First it was Pets.com, and all the unbelievably stupid Internet businesses in the 1990s.
Investors were so eager to buy dot-com stocks, all you had to do was put an “e” in front of your business or product and you’d immediately be worth millions.
It didn’t matter that most of these companies didn’t make any money. Investors kept buying.
Later on after the dot-com bubble burst, another big craze developed in junior mining stocks– shares of small exploration companies looking for big mineral deposits.
The epicenter of the junior mining industry is in Vancouver, Canada, and the stock exchange there (TSX-V) throttled to record highs.
Shares of companies with literally no profits, no revenue, and no assets were worth tens of millions of dollars.
Then that bubble burst.
A few years later, a new hot craze developed– in cannabis companies.
The market has been flooded with companies (many of them curiously based in Canada’s poor climate and high cost structure) with plans to grow medicinal marijuana.
Their stock prices have soared, with valuations in some cases exceeding $1 billion.
Every time the bubble bursts with these big trends, most of the companies get wiped out.
Only a handful survive– primarily the ones who focused on building long-term, sustainable businesses instead of chasing a quick buck.
From the ashes of the dot-com bubble, companies like Amazon, Godaddy, eBay, etc. emerged in-tact and are still successful today.
Similarly, while many junior mining companies went completely bust, a handful are still operating and quite profitable.
And there will be a few extremely successful cannabis companies over the next several years who step over the remains of their innumerable, defunct competitors.
Clearly today’s big craze is crypto and blockchain.
Like the dot-com bubble in the 90s, you could add the concept of blockchain to just about anything and have a ‘business’ worth millions, no matter how idiotic the original idea.
(Someone will soon pitch me an idea for an app to publish grocery lists into the blockchain. It’s absurd.)
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