25 The dot.com bubble

25 The dot.com bubble

1. At the height of the high-tech stocks gold-rush, private investors were piling money into internet and technology companies. In many cases, these were little known business that had been in existence for only a few months. Nevertheless, investors were hungry for stocks on the basis of wildly optimistic internet bulletin board tips.

2. Then in March and April 2000 share prices crashed. A lucky minority had got out in the nick of time, but the majority of dot-come investors suffered substantial paper losses. Looking back at the frenzy that led up to the crash, it now seems amazing that so many were taken in by the glitter of fool’s gold, and were willing to part with their cash so readily. Dot-com shares doubtless seemed to many to be a casino where they could not lose, but as the old saying goes, “If it seems too good to be true, it probably is”.

3. London Stock Exchange figures show how cheap online share-trading services caused net-based share-trading to rocket in the months leading up to the crash. The average number of transactions ballooned to 134,000 a day in January, hit a peak of 157,000 a day in May – just days before the first signs of disaster.

4. Many of the new share-dealing services were struggling to cope with the demand, and some had to close their doors to new customers. There were numerous complaints from investors having to waiting on the phone for an hour or more to get through to a broker.

5. Following the crash, high-tech stocks continued to be traded, of course. But many investors, nursing burnt fingers, pulled out of the market together. Others scaled down their trading. The result was a dramatic drop in trading volumes. In the May following the crash, transactions were down to around 100,000 a day, with subsequent months mostly seeing further declines in the number of shares changing hands. In other words, there was a full-blown slump.

6. Although the party was over for private investors, online share-dealing services mostly continued to be profitable, with many new companies joining the already crowed market.

7. However, despite the fact that there was still money to be made, shares in the sector fared poorly, and in late 2000 some were standing at just a tenth of their value prior to the crash – comparable losses to those seen by the dot–coms whose shares they had once been trading so frenetically.

8. In the years following one of the most talked-about crashes in recent history, some investors who hung on to their shares have partially recouped their losses, particularly when smaller companies have been bought out by larger ones. In the majority of cases, though, the recovery has been modest, and accompanied by a strong sense of caution in investors. It general it can be said that the bubble has well and truly burst.

 

1. gold-rush

a. lots of people investing   b. lots of people making money

2. Online bulletin board tips 

a. advice from internet services  b. information about internet services.

3. Share prices crashed

a. share prices fell dramatically  b. share prices stopped rising

4. Paper losses

a. losses of banknotes           b. losses of money which never really existed.

5. Fool’s gold

a. good profits for stupid people  b. something worth much less than many people believed

 

6. only available on the internet net-based

7. reduced scaled down

8. being bought and sold changing hands

9. taken over  bought out

 

10. Investors piled money into the market means that people…

a. invested cautiously   b. invested heavily    c. invested all their money.

11. People parted with their cash readily means that people were…

a. able to spend money   b. spending too fast   c. happy to spend their money

12. Small investors got their fingers burnt means that small investors…

a. were unhappy        b. were cheated        c. lost money

13. There was a drop in stock exchange trading volumes means that…

a. fewer share were traded b. more shares were traded  c. many shares went down in value.

14. Many investors pulled out the market altogether means that many investors…

a. sold all their shares b. stopped buying shares  c. sold their shares at the same time.

15. In financial terms, the party’s over means that it is no longer possible to…

a. enjoy making money  b. make money easily  c. lose more money

16. Investors have partially recouped their losses means that investors have got…

a. all their money back  b. most of their money back c. some of their money back

 

17. share prices rocketed   up

18. share prices slumped   down

19. share prices recovered  up

20. share prices hit a new peak up

21. share prices soared      up

22. share prices dropped dramatically down

23. share prices ballooned  up

24. share prices crashed  down

25,. There was a sizeable drop in share prices. Down.

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