Special Report-

I remember it like it was yesterday, September, 1998 just after my birthday and the dot-com bubble was in full inflation mode.  Stocks were going public left and right. Many of them had never made a penny of profit and yet drew millions from investors.  Bubbles were nothing new to the markets, but when we are in one, many seem to forget the past.  Boy did they miss this one!

Late that month, a relatively new online auction company called eBay was coming to market and investors foaming at the mouth to get a piece of it.

During the height of the new “internet era”, where anything ending with “.com” was getting bought up by every sucker and supposed professional alike.  Even with the meteoric rise of so many worthless companies, caution was thrown to the wind and traders continued to buy worthless companies right up into the new millennium.

I remember the first day of trading for eBay.  The stock rose by nearly 300 percent and its market cap on that day was close to 2 billion,  almost 6 times what its closest competitor Onsale.com was worth.   It was an unbelievable showing and that was only the beginning for the fledgling online retailer.

For the record, I was a believer in eBay’s business.  I thought their idea and website was pure genius, but I was extremely skeptical of the insane valuations that the market was willing to give them, so I didn’t buy in.

Starting with their debut on the NASDAQ, eBay proceeded to go straight up until about May of 1999, at which point they had a price to earnings ratio (P/E) of over 1000!  In the months that followed, even with a drop in stock price, the price to earnings ration or P/E (which is a common way to measure a stock’s value) had risen to over 1600 at one point, before dropping back to a more realistic level as the company began to make real money.

The average P/E range of stocks in the S&P 500 index is somewhere between Read more