Five years ago. Five faith-shattering, bowel-twisting and ultimately sobering years ago, the Nasdaq topped out at 5,132 -- a number that seems as elusive today as a cure for the common cold, but that on March 10, 2000, was just another stepping stone on the way to greater things.

Five years ago, investors could have looked back to March 10, 1995, when the Nasdaq traded below 800, and felt a gust of pride at all the wealth created in such a short time: Why, there were so many new technologies promising to make the world a better place that all a smart young CEO had to do was step outside his business school, open up his wallet, and the dollars would come flying in. Just chanting that magic mantra -- "Things really are different this time" -- was enough to ratchet the market higher.

Five years ago, it turned out, things really weren't all that different.

It's a good bet that anyone who was long in March 2000 probably wouldn't want to relive the past five years again. But at least we can console ourselves with the knowledge that we learned something from the whole bitter experience. And those lessons are important, right?

After all, the most painful lessons keep us from making the same mistakes again and again. How were we to know that the Nasdaq bubble would burst in 2000, just like the Japanese stock market bubble had burst in the early 1990s, or like the Southern California real estate bubble had burst in the late 1980s, or like the emerging markets stock bubble had burst in the mid-1990s, or like the -- oh, never mind.

In my own muted celebration of the anniversary of the Nasdaq peak, I went back and read a lot of news stories from March 2000. Boy, there sure were plenty of scary signs that people were acting irrationally:

  • Venture capitalists scrambling to find start-ups to pour money into;
  • Stories in esteemed publications like The New York Times touting a "Goldilocks" economy that could keep growing with low inflation for years;
  • Tech companies like Buy.com, many of them yet to post a profit, jamming the pipeline to reach an overheated IPO market;
  • Companies like GuruNet (GRU) surging 30% in a day on news of a partnership deal with a tech giant like Google (GOOG).
  • Oh, wait a sec -- those stories weren't from early 2000, they're from early 2005.

    Well, they're scary signs now or then. According to VentureOne, the median valuation of U.S. venture-backed start-ups grew to $13 million in 2004, the highest level since 2001. And as Business2.0 pointed out recently, many venture capitalists who raised money in 2000 are facing a five-year deadline to either invest it or give it back to their own investors. The magazine estimates that as much as $13.5 billion in venture money could be put into start-ups in the next several months.

    Meanwhile, an IPO market that had been hostile to red-inked companies is now more forgiving. Yes, Buy.com is again braving an IPO , despite a $15.4 million loss last year. And it's not alone: ArcSoft, a maker of digital-media software, has filed after posting a $536,000 loss in its fiscal 2004. CombinatoRx, which says it's "developing new medicines built from synergistic combinations of approved drugs," filed to go public with zero revenue and a $22 million loss.

    Sound familiar? So does this line in yesterday's Times: "A wide variety of indicators now suggest that the economy is in a sweet spot: business investment is soaring; inflation appears more moderate than a few months ago; employment is climbing, even if real wages are not."

    All these bullish factors are accompanying the kind of irrational activity in the stock market we saw in the late 1990s. According to Baseline, more than 75 U.S. stocks have risen more than 50% so far this year, including many that have not posted a profit in recent quarters. Among them is GuruNet, a search site that saw its stock surge more than 30% Tuesday on an announcement that it would run Google ads on its site.

    Here's some information that may interest GuruNet investors: Google ads are hardly a distinguishing feature on any Web site. Hundreds, if not thousands, of blogs run them, including one written by venture capitalist Fred Wilson, who recently disclosed he made a whopping $500 from the ads (which he donated to the Grameen Foundation). GuruNet's market cap jumped $19 million on that news.

    Irrational surges on trivial news is a hallmark of speculative trading. So does GuruNet's bizarre trading, along with hotter VC and IPO activity and renewed economic optimism, mean the market is going to plunge more than 50% over the next few years? Nope. But taken together, they are early indicators that even if some investors learned their bitter lesson from the market crash, they don't care.

    Speculative investing in loss-making companies hardly qualifies as a bubble. But it does raise a dilemma that investors haven't had to face for the past five years: When stocks start defying valuations and rocket upward, everyone must make a choice -- either sit on the sidelines watching your peers rake in money, join the game of musical chairs and pray you'll get out before the music stops, or take the plunge and start believing that the sky's the limit.

    For those choosing the third option, allow me to be the first to say it: Maybe things really are different this time.

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