Price has a massive impact on sentiment. People begin to believe things that they otherwise wouldn’t have when prices were lower. From 2001 to 2019, most investors said the late 1990s was a crazy moment in market history which they probably wouldn’t participate in if it happened again. Now, we are seeing the late 1990s used as justification for current valuations. Furthermore, investors are supporting their current optimism by saying 1990s traders were right because the internet ended up being a massive thing which transformed society forever.
Some Future Industries Don’t Last
Of course, it’s not that simple. Many of the expensive internet companies that were successful had their stocks languish for years until they recovered. The unsuccessful ones never recovered. Then there was the hype around telecom which had terrible unit economics and was a major flub. The graphic below is from Tren Griffin’s article.