Why is Buffett's 1999 warning still relevant today?
At another Berkshire meeting, Warren Buffett made an unpopular warning, which the audience did not approve of, and which, in particular, boiled down to the fact that one cannot expect too much in the long run. The fact is that at certain periods in recent U.S. history, when the value of the American economy grew by 2, 3 and even 5 times, there was no change in the stock market, and all because it was initially too overvalued.
Buffett pointed out the almost exorbitant performance of the market in recent years and urged investors to be careful. In this regard, recall a similar call for caution in late 1999. The infamous dot-com bubble burst that caused the Nasdaq stock market to plummet 75% and famous companies such as Apple and Amazon to lose over 80% of their market capitalization. Then the downturn also affected Microsoft, whose stock plummeted 34% and it took them 14 years to get back to their 1999 levels. And Intel only managed to make up 24% over the next 17 years.
It should be recalled that almost 2 years ago, Charlie Munger, Buffett's partner at Berkshire Hathaway, also warned of dangerous market mania, saying that investors were "very close to playing with fire."
The facts prove Buffett and Munger right: over the past year, the S&P 500 has fallen more than 22%, ending a historic 14-year bull market. During sharp declines like those experienced by Big Tech stocks in 2000 and 2001, giants like Tesla, Apple, Amazon and Meta Platforms lost trillions of dollars in market value combined. But we can also point to a 23% drop in funding over the same period and startups: clearly, there has been a market fracture.
Investors are shaken up after nearly a year of market decline. And it brings to mind a few more of Buffett's wise words: be greedy when others are afraid. If you remember that Big Tech stocks, as the hardest hit during the last big sell-off in the sector, recovered by more than 2,000% each in the following years, the advice for investors looking to profit from a possible recovery is to take advantage of easy access to start-up companies through crowdfunding. Specifically, we can mention StartEngine, a crowdfunding giant that allows ordinary investors to bid for stakes in some of the most interesting, albeit risky, companies in the world
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