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Bursting the Bubble
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During the tech stock boom in the last half of the 1990s, the public increasingly looked to business journalists to identify "hot stocks." Was the press skeptical enough?

In the late 1990s, as the bull market surged skyward, the media devoted huge amounts of air time and column inches to the new economy. Suddenly companies that had never made a dime, with few or no real assets, and little to recommend them but a "hot new technology" or a "revolutionary e-marketing strategy" were receiving major media attention.
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The grandiose predictions for the company paid off big for Webvan. On its first day of public trading, this basically non-existent corporation had a market capitalization of more than $10 billion.

But in April, 2000, the growl of the bear echoed through Wall Street as $2 trillion evaporated from investors' portfolios in a single week.




Financial news programs found great success in telling about self-made paper billionaires. But what next?



Just over a year later, after spending more than $800 million without ever turning a profit, Webvan became one of the 300 new economy businesses to declare bankruptcy in the first seven months of 2001 alone.

The Webvan story is a fable for the Cyber Age. As hundreds of other start-ups were increasingly being valued not on business fundamentals but on sky-high visions of the future, journalists skeptical of the dot.com revolution became marginalized. The public wanted good news and the mainstream media obliged.


Technology stocks reached astonishing heights in 2000.
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When BARRON'S published a cover story predicting that 50 highly valued dot.coms would run through their capital in 12 months, the article's writer received death threats.

Now, as investors lick their wounds and wonder if they will ever recoup their incredible losses, these questions remain: In a bull market that carries stock valuations into uncharted territory, what is a journalist's obligation to hold to traditional methods of reporting a company's financial health? How should journalists deal with the knowledge that what they write has the potential to move the market? How should a channel like CNBC edit the information presented by its guests -- many of whom had personal and professional stakes in the stocks they promoted?


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