A 10-year long look at the tech bubble
TEXT OF INTERVIEW
Steve Chiotakis: Hard to imagine now, but there was a time when the Nasdaq with its tech stocks had a whole lot more zing to it. This week marks the tenth anniversary of the peak of that bubble. A decade on, a lot of those stocks are mired in values about half of what they were. Fortune Magazine’s Allan Sloan is with us this morning to talk about how to commemorate this anniversary. Good morning, Allan.
Allan Sloan: Good morning, Steve.
Chiotakis: Why did tech stocks start tanking in the first place?
Sloan: Because they were priced at insane levels relative to their earnings. The Nasdaq had run up 80 percent in a year, and people say, by god, what have we done? And if you look at a chart from those days, you see the thing just started heading down, and still today is less than half of what it was. Even though many of the companies that are survived are much better than they were and much richer, their stock prices are still down from what they were 10 years ago — Microsoft, Cisco, Oracle — their stocks are still way down from what they were.
Chiotakis: Couldn’t when we were sort of climbing that mountain, Allan, back in the 80s and 90s, couldn’t we see this coming?
Sloan: I mean with all due respect, I saw it coming, and I kept saying “No tree grows to the sky” and trotted out every cliche I could think of, and it didn’t make any difference. There are maybe half a dozen of us senior busienss journalists who kept saying, we were just sort of overrun. Until one day suddenly, we became prophets.
Chiotakis: And what lesson did we learn, oh prophet?
Sloan: Well, the lesson I learned is if everyone’s telling you to buy a house or everyone’s telling you to buy tech stocks, well, that’s probably the time you should think of doing something else.
Chiotakis: What are the tech stocks of today do you think, Allan? What sector should we watch for the next bubble?
Sloan: Well, the obvious one are a long-term U.S. Treasury securities. Because I don’t doubt the Treasury’s ability to print dollars and repay its debts, but I think interest rates on these things, like many people, are going way, way up, and if you buy a 30-year Treasury now, I think you’re going to come to regret it.
Chiotakis: So then how’s this going to pan out? Who’s going to be affected by this?
Sloan: Well anybody who owns 30-year Treasuries is going to see the value of his investment way down when the interest rates on them go way up. And my bet would be over the life of this, you’ll probably lose 25 [percent] or 30 percent of your money. But I guess we’ll have to reconvene in 30 years and see if I was right.
Chiotakis: Our prophet, Fortune Magazine’s Allan Sloan with us this morning. Allan, thanks.
Sloan: You’re welcome, Steve.
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