If you weren’t there to witness the markets in the 90′s it’s almost impossible to convey what they were like. The best way I can put it is that they acted as if they were on a special type of meth. A type that gets you amped up, but doesn’t make you crash. You just keep getting higher, and higher, until you lose complete touch with reality.
And if that is the analogy we are sticking with here, then the NASDAQ was on the blue “Walter White” type of meth.
During the decade of the 90′s the NASDAQ rose 774% compared to the Dow Jones 314%, and even those amazing numbers disguise some of the insane moves in the stocks that made up the composite.
$DELL went up 91,863%.
$EMC went up 83,456%.
$AOL went up 70,626%.
To illustrate just how sick those number are, if you dropped five grand into $DELL on the last trading day of 1989 and then took a ten-year nap, you would have woken up with an account worth $4.5 million dollars.
These types of returns made it commonplace for secretaries and school teachers to quit their jobs, fund their brokerage account with their life savings, and try to day trade for a living.
The housing bubble, the crash of 2008, and even the aftermath of 9-11 couldn’t hold a candle to the 90′s, especially the late 90′s, in terms of sheer madness when it came to valuations and the mechanics of the market.
A lot of crazy trades were done during those wild days, but I am going to tell you about the craziest I know of personally.
A friend of mine, who is now a well-known and respected trader, but back then was still pretty green, had decided that $BRCM was going to go on a run. It wasn’t really a stretch to think so because it, along with any number of NASDAQ stocks had no problem running twenty, thirty, sixty, even one hundred points in a day.
My friend was not even a full-time trader, but like many folks caught up in the mania “traded” while he was at work. He had been stalking $BRCM for a long time, which back then meant two days. He had done a ton of research on it, which meant he saw it on the Nightly Business Report. And he felt he had a good feel for the stock, and an edge when trading it, which meant his friend said it was “hot.”
He decided that he was done pussy footing around and was going to go in for a BIG position, so he spent the morning buying a total of five thousand shares, which took up all of his day trading buying power. A drop of just a few points, which $BRCM could do in seconds, and his account would have taken a serious hit.
This was a guy who was making about $45K a year, but he had no fear. No cares in the world. No reason to think that his position would go anywhere but up. So much so that he set a series of limit sell orders for a thousand shares each, at ten point intervals.
And then he did the craziest thing ever. He turned off his computer. Just like that, with no stop order in. Remember, this was back before smart phones and the ability to monitor and trade your positions while away from your desk. And then he went to lunch.
I think he had a club sandwich.
When he got back to work, he turned on his computer, logged into his brokerage account, and checked his open orders. He had none. And just like that he made a cool $150K while at lunch.
Were you in the markets in the 90′s? Do you have any crazy trading stories? If so, let me know about them at email@example.com and I will pick some of the best to highlight for a post later this week.