Mark Cuban: Current Tech Bubble Even Worse Than Dot-Com Bubble

In a recent post on his blog, businessman, investor and Dallas Mavericks owner Mark Cuban compared the current state of the technology market to the dot-com bubble of 2000. According to Cuban, the tech sector is once again in a bubble, but this one is even worse.

Dot-Com Nostalgia

Cuban begins his explanation with a tongue-in-cheek recounting of the “good old days” of the dot-com bubble. At the height of the bubble, there were hundreds of companies going public on a seemingly daily basis.

“You just pick a stock and buy it,” Cuban recalls. “Then you pray it goes up. Which most days it did.”

Cuban describes the environment of a bubble by explaining that investors are constantly approached by people pitching ideas and making comparisons to billion-dollar success stories. Cuban sees this most recent bubble as the same scenario, but the list of dot-com success stories such as, AOL Inc AOL 3.75% and Netscape have been modernized to include Uber, Twitter Inc TWTR 0.46% and Facebook Inc FB 0.39%.

The Current Tech Bubble Is Even Worse For Investors

While Cuban sees similarities between the current environment and the dot-com bubble, he sees one major difference that makes the modern environment even more dangerous for investors: lack of liquidity. While the dot-com bubble mostly included public companies, the modern tech bubble mostly involves small, private companies.

“Back then, the companies the general public was investing in were public companies,” Cuban writes. “They may have been horrible companies, but being public meant that investors had liquidity to sell their stocks.”

Private Crowdfunded Apps Replaced Public Websites

According to Cuban, the current bubble has come about largely as a result of the new crowdfunding movement, through which small investors can invest in private start-up tech companies. Cuban believes that the only difference between the majority of modern startups and the ones in 2000 is that modern startups are mostly pitching apps, while dot-com start-ups were pitching websites.

Read this article and all my other articles for free on Benzinga by clicking here

Want to learn more about the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common SenseI don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and is always available on your local internet!