I’ve written before about the perils of speculative financial bubbles and now find the necessity to do so once again as we reach the ten year anniversary of perhaps the mother of all financial bubbles.  

On March 10, 2000 I was attending the Cowen Health Care Investment Conference at the Westin Hotel in Boston. On that day NASDAQ traded as high as 5132.  A decade later it remains less than half of that level.

While much has been written about the dot com bubble that began to implode on this day there was also a huge biotechnology stock bubble that had reached its zenith as well and this conference was clearly its epicenter. As Wall Street awaited the first ever mapping of the Human Genome, dozens and dozens of speculative companies supposedly on the cusp of changing medicine forever through the use of freshly minted investment jargon such as Genomics and Monoclonal Antibodies had recently seen their stock prices appreciate several times over.  Like the dot coms these companies barely had revenues let alone income.

There is definitely a self seducing element to speculative stock bubbles stemming from the process of simply buying certain types of stocks and then watching them go up every day for months on end.   Is it ever really that easy?  Well the answer is yes, once in a generation it is.  This was that time.

Looking back there were clear anecdotes serving as red flags at that conference.  One I’ll never forget was the attendance levels at the individual company presentations.  The biotech management teams spoke to jam packed ball rooms of people spilling out into the upstairs lobby.  Analysts and fund managers stood on tip toes just to get a glimpse of who was talking.  Conversely, the presentations of established companies with long histories of earnings growth and profitability took place before sparse audiences.

A second one was watching the returns of the Super Tuesday primaries as George Bush and Al Gore official disposed of John McCain and Bill Bradley, setting the stage for their historical contested election eight months later.  I watched those results alone and don’t remember anyone uttering a word about either candidate the entire conference.  In a stock bubble politics is the last thing on anyone’s mind.

But perhaps the greatest red flag of all came the following night when Cowen hosted a private party featuring ‘70s pop music legend Donna Summers who performed for a hundred or so select clients.  There was an open dance floor for all of us thirty and forty somethings that night, many who like me remembered Ms. Summers singles and albums climbing to the top of the Billboard charts during our high school years.  She mingled with the crowd during her break and I recall thinking to myself, if I’m within an arms length of the Queen of Disco something about the business I’m in must be overvalued.

At one point in between songs she made a joking reference to feeling foolish about not having money in the stock market.  Of course in retrospect she was the smartest one there.  She sang all her hits, McArthur Park, Dim All the Lights, Bad Girls and On the Radio as this seemingly not so boring crowd of money managers danced away in the euphoria that was the stock bubble of March 2000.  She closed out the night with Last Dance which for many that night it was.