Part I: Stocks and Their Value

Random walk: future steps or directions cannot be predicted on the basis of past history. Thus, short-run changes in stock prices are unpredictable. Investing as a Way of Life Today Difference between speculations and investments: time period and predictability of the return. To stay even, your returns must match inflation (averaged 4% from 1962 to 2018). With regard to beating inflation, that implies all the money that’s in people’s bank accounts is depreciating, as opposed to maintaining value....

The Tulip Bulb Craze Virus causes colored stripes in tulip petals. The Dutch valued such bulbs. Prices rose (just when one thought they couldn’t go higher). Let the tulipmania begin. Note: And that’s where FOMO comes in. You can’t argue with the results. You just want to dip your toes and get out. I watched Bitcoin keep climbing, until I got into the game with $50… Tulip bulbs options....

The Sanity of Institutions Growth, Tronics and Synergy Growth companies such as IBM and Texas Instruments sold at price-earnings multiples of more than 80. Questioning the propriety of such valuations became almost heretical. Companies plastered “tronics” in their name. The tronics boom came back to earth in 1962. Synergy Generates Energy: The Conglomerate Boom Baker Co. & Electronik Co. have 200k shares outstandings, and $5 earnings per share per year....

Dotcom crash took away $8tn (yearly output of Germany, France, England, Italy, Spain, the Netherlands, and Russia) of market value. The Internet Bubble The internet had 2 bubble qualities: some new technology & some new business opportunity. A Broad-Scale High-Tech Bubble Cisco and JDS Uniphase, producers of the backbone of the Internet, sold at +100 P/E. As usual, companies changed their names to include “dot.com”, “dotnet”, and “Internet”. Stock High ‘00 Low ‘01–‘02 Decline Amazon....