The first half of the 2000 has just ended. The Nasdaq fell 13.3 percent in the second quarter, wiping out the gain made in the first and falling a net 2.5 percent. The Dow Jones Industrial Average fell by 9.1 percent during the two quarters. Amid the market slump, Amazon.com, whose boss Jeff Bezos just had become Time magazine's man of the year six months ago, saw its share price fall to US$36.31, down 70 percent from US$106.69 last Christmas. A hero a half a year ago, Amazon has suddenly entered the land of the cyber-sick.
Since July 1, the number of "Internet bubbles" and "new economy bubbles" has been on the rise. Over half a year, 18 US Internet companies have gone bankrupt and more than 5,398 people have been laid off.
Whether the US stock market in the first half of the year can be called an "Internet bubble" or "new economy bubble" is debatable. But in any case, the new economy has shown its vulnerable aspect. US market analyst Fred Barbash described it as "one year of fantasy and half a year of reality." He was spot on about some aspects of the "new economy."
The biggest vulnerability of the new economy is its virtual nature. All kinds of analysts and financial management experts have build a dreamland on the back of arguments that sound almost true. It makes people "almost" believe they can ride into an economic nirvana on a cyber-shuttle.
This kind of virtuality twisted the direction of capital flow. The question now becomes who will dare correct this kind of argument before it evaporates? Take the "Amazon myth" for example. Lehman Brothers issued a warning last year that Amazon.com's cash would soon dry up. But droves of people immediately emerged to rebut the warning.
The virtual nature of the new economy has created a biggest predicament: it twisted the ecology and flow of capital. Some industries bloated pathologically, while traditional industries shrivelled to the brink of collapse. Comments such as, "Let the traditional industries fall if they must," were heard.
More rational analysts believe the market is in a phase of very positive correction. Things can only go back to reality after fever factors are eliminated from the "new economy." Only then can the market mechanism save traditional industries. Some of the fever factors in the "new economy" are beginning to withdraw, but following the announcement of the human genome map, many people are beginning to worry that a new fever will soon descend on bio-tech industries.
In particular, the waning of the high-tech fever has just about put the IPO market on ice for the moment. The bio-tech industry is also a vulnerable area and will give rise to even more bubbles. Flipping through news clippings from last year, I was astonished to see someone claiming, "The US stock market can be expected to reach 30,000 points."
Nan Fang-shuo is the publisher of The Journalist magazine. Translated by Francis Huang
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