"It was a bubble, and it did burst. About that, most people agree.
"What everyone really wants to know is, what's next? How much, and how fast, can technology stocks recover?...
"The basic truth market historians draw from past bubbles is that it almost always takes longer to repair the damage than people expect.
"After the economic crash of 1837, for example it took a handful of railroad stocks a solid decade to regain crash levels -- and most didn't....
"Most recently, investors point to the 1992 biotechnology collapse. Biotech stocks ... didn't stop falling until March 1995. They didn't regain old highs in a lasting way until December 1998.
"There is also the fate of the electric utilities in the 1920s. Bearers of a breathtaking new technology that transformed the world just as the Internet is doing today, it was 1964 before they returned to their 1929 peak, and they never regained the vigor of their youth.
"Radio Corp. of America was another highflier of the 1920s. American fascination with the radio propelled RCA's shares to a high of $500 just before the '29 crash -- an increase of 2000% over six years. The crash wiped out all those gains, and it took more than three decades for the stock to revisit its highs....
"Today's technology pessimists, such as Jeremy Grantham, co-founder and chief strategist at Boston money-management group Grantham, Mayo, Van Otterloo & Co., argue it could be a decade before technology stocks turn convincingly upward.
"Mr. Grantham has tracked more than a dozen past bubbles involving gold, oil, nickel, the dollar, the British pound, Japanese stocks in the 1980s and U.S. stocks in the 1960s. In every case, he says, the stock, commodity or currency gave back all the extra, inflation-adjusted gains beyond what it would have attained if it had simply maintained its slower, prebubble performance. He believes tech stocks have still farther to fall, and that they will pull the broader market down into a lasting slump as well...."
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