EV - History Says You Shouldn't Buy Tesla Stock Dip As the Tesla Bubble Pops
Tesla Stock ( NASDAQ:TSLA )
I was around during and after the dot-com bubble burst . A few years before the bubble, online trading had become popular, bringing in a lot of new, inexperienced investors who dabbled in the stock market. Many of these investors thought the stock market was the way to get rich quickly.
When opening a trading account, you must decide what to buy. Many people did this during the dot-com bubble. Most of these new investors needed to learn more about how prices are set or how to value something, so they followed what the media said was the next big thing and mainly bought companies that were in the news.
Sell-side analysts added to the frenzy by setting crazy target prices for companies with no sales, no profits, and no chance of ever becoming a business. But the bubble didn’t just affect dot-coms. Good companies with profits and prospects also saw their shares skyrocket to prices far above what they were worth. Microsoft ( NASDAQ:MSFT ) almost monopolized operating systems and office utility software for personal computers, but its share price hit a new high 17 years after the bubble burst. Cisco Systems ( NASDAQ:CSCO ), a leading telecommunications equipment maker, is still trading below its high point from 2000.
Another bubble that was blown up by a huge number of small investors is quickly going down. The dot-com bubble was much smaller than this one. In the 1990s, few small investors traded on margin, and even fewer traded options because the fees needed to be lowered, and most accounts only let you trade covered calls and cash-covered puts. This time, the buying frenzy was made worse by margin trading, options trading, and very low-interest rates. As a result, we have a multi-billion dollar bubble instead of a multi-million dollar bubble.
Tesla’s Inflated Bubble Is Bu...
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