Conclusion

From 1996 onwards, the desire to own shares in an Internet company was so great that it directly affected the entire world economy. As the craze increased, it became necessary to split the shares up to three times a year (e.g. Yahoo, Amazon, Cisco). Speculators, for example investment firms and insiders, made large profits by buying when prices fell and selling when prices were high, many became exceedingly rich. Soon ordinary investors of all classes converted their savings in banks and were attracted to invest in Internet companies by the apparently effortless boom that was created. Their investments were often based on irrational expectations, animal mentality, or other idiosyncratic habits. By the law of supply and demand, the value of the share with regard to the companies profit was completely out of proportion and the price to earnings ratio was often over 200%. In fact most of these companies lost money every year. Nevertheless, there press releases where still extremely positive on the ground of the company’s growth in terms of customers spurning this "mania".

Eventually in 1999, the more prudent began to recognize this rage could not last forever. As these insiders reached this conclusion and sold their stakes, the share prices dropped and panic hit the volatile Internet market. The speculative bubble burst, prices fell, and confidence plummeted.

In the end, many found themselves the owners of shares of bankrupt companies that nobody would buy and victims of irrational speculation.

Looking at the NASDAQ index today and comparing it to the individual companies, it became apparent that every company’s share was influenced by the overall stock market performance. However, after the bubble had burst only those companies, which could stratify these new, more realistic criterions for evaluating an Internet company were able to survive in the market. Many others who did not show any financial performance went into liquidation after the crash (e.g. pet.com).

We therefore have to conclude that nearly every Internet Company was a bubble, as they all were overvalued even if their financial performance was extraordinary (e.g. Cisco); there stock value was even more extraordinary.

Although the bubble has burst now and most of the shares are now more adequately valued with regard to there P/E ratio, it seems it might well be the case that the bubble will build again, as the human race has not learnt from its mistakes. There has been the tulip bubble, the automobile bubble, the Wall Street crash 1929, the PC bubble, etc. and now the Internet bubble.  It has also become apparent that the bubbles increased in size as centuries progressed. Due to coming 21^st century innovations, further increasing amount of information and disinformation via all sort of mediums, which will soon encompass the whole world and people of all social classes, making attraction to the stock market bubble even greater, as more and more people will participate in the ultimate goal to be part of this ‘mania’ or ‘cultural need’ and dream of becoming exceptionally rich.