I guess the right question is, was a basket containing Amazon.com, pets.com and all the rest overvalued? Amazon is up about 15X since its peak before the crash, the dow is at 3X over the same period.

So as long as AMZN was >= 20% of your basket, then it was fairly valued. Sounds about right.

> was a basket containing Amazon.com, pets.com and all the rest overvalued?

Yes. This has been extensively studied. Almost every investor who deployed new capital in the late 90s lost money on those investments.

> as long as AMZN was >= 20% of your basket

You’d have to torture causality to come up with a portfolio that would have made sense in the 90s and would have been 20%+ Amazon. It wasn’t even in the top 10 most valuable public companies by market cap [1].

[1] https://en.m.wikipedia.org/wiki/List_of_public_corporations_...

But it obviously would have been a major component of any "Internet" basket at any date after its IPO in 1997. But 20% major? Perhaps not.

Keep in mind, too, that $1 in January 1999 would buy what $1.53 does today [1]. Saying you’d be 20% Amazon in 1999 is the same as saying you’d have bought the stock then. Yes, of course—with that prescience you’d overperform.

[1] https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1&year1=199901...

5X is worse case, it's 15X in dollar terms, but an equivalent investment in Dow would be almost 3X so thus the discount.

It's also worse case because it assumes you buy at the $107 peak. It didn't spend much time above $100...

Buying Amazon in the 90s is analogous to buying Berkshire in the 70s. It would have taken a prescient and outsized allocation decision which, ex ante, would have been difficult to justify.

A very large number of people were buying Amazon and the other internet stocks in the 90s. If not, there wouldn't have been a bubble. The part requiring the magic genie would be not selling it for the next 20 years... :)

>So as long as AMZN was >= 20% of your basket...

and there's the rub, knowing, a priori, what the proper balance should be.

Amazon also aggressively and effectively expanded from being "just" a bookstore to a cheap store that sells everything, and diversified even further by effectively creating the multi-billion dollar cloud computing market, which in turn created the hyperscaling startup boom. Amazon deserves that valuation for that (not so much for its extorsion of its employees though; you'd expect one of the highest valued companies of the world to pay its employees accordingly)

I don't have any citations, but I do seem to recall reading articles saying that if you had bought and held a conventional sort of basket of dot-com stocks through that whole era you would have come out quite well.