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Posted October 13, 2025 at 2:21 pm
Host Andrew Wilkinson joins Steve Sosnick, Scott Bauer, and Jeff Praissman to revisit the trading floors of the late ’90s, unpack how speculation and innovation collide, and explore what investors can learn from history’s rhyming cycles.
The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.
Hello everybody. Welcome to today’s session. I’m Andrew Wilkinson with Interactive Brokers. I’m thrilled today to have three distinguished guests with us, each of whom brings firsthand experience from the trading floors of – yep, we’re gonna go back a quarter century to the Dotcom Era. Steve Sosnick. Jeff Praissman, both formerly with Timber Hill, part of the foundation of Interactive Brokers. Steve is now our chief strategist here, and Jeff, a former options trader, is on the marketing and education team.
And Scott Bauer, who was a proprietary options market maker and trader out on the Cboe floor during what was one of the most volatile periods in market history.
Welcome, Scott. How are you?
I am great and very happy to be here. Thanks for having me.
You’re very welcome. So together these gentlemen are gonna help us explore whether today’s market driven by AI enthusiasm and a concentration in technology and central bank dynamics is somewhat echoing the speculators of excesses of the early 2000’s or are we entering uncharted territory.
Recently, there have been comments from the Bank of England from JP Morgan Chase CEO Jamie Dimon all about whether we are potentially heading towards some sort of a speculative excess. Now, if you think back to 1995, the Fed Chairman at the time, Alan Greenspan, warned about valuation and excessive prices for equities in what was termed “irrational exuberance.”
That market kept going up and up and up for a further five years. So, what we’re gonna do today is see what it was like to trade through what’s known as thedotcom boom and bust. We’re gonna talk a little bit about valuation metrics and investor behavior across other areas, and whether today’s AI driven optimism is a healthy evolution or is it a warning sign? So, let’s jump straight in. I’m gonna ask all of you, and let’s start with Scott. Tell us a little bit about where you were back in 1995, 2000, 2002. What were you doing? What did it feel like?
Scott Bauer: I was trading on the floor of the Cboe. I was a market maker. I was a partner in an options trading firm called Botta Capital Management. And I was trading in the Coca-Cola options pit for a very long time in ‘95, ‘96. I had started much earlier than that. And then when the dotcom era started, just shortly thereafter, ‘97, ’98-ish, some of these stocks started getting listed trading options.
Amazon being one of them. When Amazon was listed, and Jeff and Steve knowthis, and Andrew, back in those days, back in the nineties when a stock was listed on a certain exchange, it was only there. So, a stock that was trading on the Cboe was not trading in Philly, it was not trading in New York, it was not trading on the P-Coast [PSE] in San Francisco.
So, Amazon got listed and it was really one of the first, let’s call it, internet driven, dotcom type of stocks, and many traders did not understand how to trade this type of volatility. Many traders traded stocks like myself, Coca-Cola, IBM, stocks that had pretty consistent volatility.
I actually became the single, only option market maker for Amazon.com options when that came out because other traders did not want to go into that pit where it was at and deal with that sort of volatility. And that was the start of, I’m not gonna call it excessive vol, but I’m gonna, I’m gonna say that was the start of an era of implied volatility that many had not seen before and that just got the ball rolling to stocks like Yahoo and AOL and other stocks like that. And I would tell you it was pretty wild time. It was a fun time.
Hey Steve, let’s ask you the same question. Where were you? What were you doing? How did it feel?
See that building over there? That’s, that was where the Timber Hill trading desk was. So that was where I was at the time. It’s a funny thing you say that, Scott, because one of the big coups that we thought we had was when we got, when we applied for, and got the listing for Netscape on the Pacific Exchange, and we had very similar problems.
I spent hours on the phone. My job at that point was managing the risk for the various equity options that we were trading. And I would spend inordinate amounts of time on the phone with our specialist on the Pacific. And she would call me up and go, “these markets suck. They’re terrible, they’re too wide.” And I’m like, “you’re right.” But we have to redo the models to get them to work. Fast forward — by the way, that specialist, named Cathy Clay, just recently left as head of Cboe options to go head S&P. So worked out for her in the end, I’d say, by the way. But, I just remember that it broke all our models.
I will say fast forward toward the end, we actually had some… We made a lot ofmoney in those days because spreads were wide. Once we figured out how to do it, the spreads were wide. The volatility was enormous. Because Thomas [Peterffy] had issues in the crash of 87, we were never allowed to have major downside exposure. The upside of that was really good. Actually, the flip side was oddly enough better for us, but that was proprietarily, not for the industry as a whole. But it was nuts. It was really, truly unprecedented. But one of the parallels I would say around. Individuals got empowered in a way they never had before, particularly in the options market. I brought this up yesterday ’cause I was at a conference with various people. One of the guys was from E-Trade and I made this point that, that individuals have taken another generational leap forward in terms of their involvement in equity markets and options markets.
And I said, let look to the E-Trade guy. I said, “let’s light this candle Stewart,” or whatever it was. And I didn’t mean to pick on him, but that epitomized, how the game started. So, I think as we’ll get into it more, my comments would be, I think a lot of this is history doesn’t repeat, but it’s certainly doing some rhyming.
So Jeff, perfect segue. You are a hybrid here. You worked with Timber Hill, but you are on a floor. Baptism of fire. It must have been a little bit like being, being in the crowd at an Eagles-Giants game.
Yeah, so at that time I was on the floor eventually I ended up moving upstairs to work with Steve as well. But you have to remember too, like there were so many things going on during that period on the floors, right? Not just with the, the dotcoms, but just structural changes, that was, Scott had brought up that they were only listed on one exchange.
They were until they weren’t, and then they began multi-listing. And so those spreads went, and we went from fractions to nickels to pennies, and the combination of not just the volatility in the markets, but just the changing format and structure of how things were traded. And those spreads going from super wide to super narrow and that volatility not changing really.
And now you have less room for error. I was actually in a pit that Apple was in, and I just remember the specialist making at one point — this is after multi listing — a 10,000 up choice market, which is like the worst thing to do because… and that’s just like the irrational thought of we gotta get the volume it doesn’t matter.
We’re gonna get the volume. So, there were so many things going on at once. And I know that’s coming a little bit off the tangent of what this podcast is about, but it was a crazy time to be on the.
If I may, can I just interject how did multi listing start? You’re talking to unfortunately the culprit. And what happened was, and I found this…
You were the demise!
This was later confirmed to me by Sandy Frucher, who was the head of the PHLX at the time, that this was intentional, but I didn’t know it at the time. And we were the specialist for a company called Visteon, which was an auto parts manufacturer. It was multi-listed because it was after the grandfathering, but of one exchange. But before the real multi-listing stuff happened and they got taken over by Ford and it was customary in those days if there was a stock merger that you would trade the stub, which would be Ford, but like with a 47 multiplier instead of 100, and you would just let those run out. Our specialist on the PHLX at the time, Joe — Jeff if you remember him? — he comes up and he says, “the PHLX is asking if we want to take Ford.” And I said, “are you serious?” And he is, “yeah.” I’m like, “of course we’d take Ford. Why wouldn’t we?” And then I thought for a second, “hold that up. This is the Cboe’s stock.”
I said, let me at least talk to Thomas [Peterffy] before I start this. And I went into his office. In those days, if I was here, he would be like, there. And I explained to him, “I think I might have just started a, a war here.”
And he looked, I explained the whole thing to him, and he said, “Ah, it’s gonna happen anyway. Go for it.” And I found out later that was that was choreographed. That Sandy Frucher wanted to start that war even though it was believed that PHLX was in the worst position ’cause their only really good stock was Dell.
And knowing that if he did it with us, we would take the bait and that Thomas wouldn’t be afraid of it. And so, I took the bait and then basically, easier to ask permission than forgiveness, or forgiveness than permission. But that is how it started literally.
Scott, let me come back to you. Steve mentioned earlier on a about history doesn’t necessarily repeat, but it rhymes. Back in 2000 manycompanies, and this is behind the Greenspan warning, wasn’t it? Manycompanies traded at extreme price to earnings ratios with little or no profit, and somebody on this call probably knows when Amazon actually turned profitable. I think it’s within the last 15 years.
Yeah, I was gonna say it’s probably 15 years after their IPO.
Yeah. Along the line.
Today we’re seeing highly profitable tech giants, NVIDIA’s a printing press, isn’t it? But those firms are dominating market indices. Does profitability justify current valuations, or are we repeating history in a different costume, would you say?
So, that is the big difference between what we’re seeing now with a lot of these AI companies. And I’m not talking about the big ones like Nvidia or, Alphabet, Google. Back then any company that just put a sign up on the internet, people were going nuts over it. People were buying into it. Valuation didn’t matter. Profitability didn’t matter whatsoever. And so even though we’re seeing a major concentration now of the big guys out there of the NVIDIA’s Apple, Microsoft Alphabet, Amazon, Meta,probably throw Broadcom in there. There are a lot of parallels but somedifferences between now and the bubble that we saw back in the late nineties. And I think the big thing there is that the products or the innovation that those companies were coming out with back in the late nineties. They would start something, and nobody would expect that product to actually really do anything for a few years or come to market for a few years.
Where with AI now we almost have that immediacy. So, we almost have a company that comes out with something and we’re using it right now. So, I think that even though there’s these massive valuations for many of these companies, they are companies that are adding value now.
Are they overvalued? Maybe. Are they undervalued? Maybe. I think that’s the big difference now. And so, if you can get beyond the concentration of the big guys into. Some of these smaller companies, but companies that actually have a product that are being put to use, then there is potential there. And I think that’s the big difference between what we’re seeing now and what we saw in the late nineties.
Jeff, the top 10 stocks in the S&P now represent about 40% of the index. That’s higher than the dotcom era where that top 10 represented 30%. Is the concentration of red flag or a reflection of economic reality?
So again, along the same lines that Scott said. I think there, there are some differences. ‘Cause what was it, like 30% around the, the dotcom peak? Probably a similar situation. The, those seven companies or whatever, the top 10 companies like, they really do have these companies are really like, they’re kind of scaled correctly. They were real companies beforehand. It wasn’t like they just came out with a sock puppet and all of a sudden, they’re worth a billion dollars, or, a hundred billion dollars. Like these companies were real companies before this AI came out and they’re just taking the next step in evolution.
And again, whether or not it works out as planned or there’s a step back, there’s at least in my mind, a foundation to these companies. And there is a value there. So it’s not just a house of cards where, you pull one out, it all falls apart again, like maybe AI doesn’t work out quite the way where we think it is, but there’s, it’s still gonna work out in some way or another for these companies and maybe some, other ones as well.
It doesn’t feel like it did back then, where you can see that there’s, there is no strong business model behind these companies and that they end up going to the wall. Steve, you’ve been watching investor behavior among what Interactive Brokers in investors do, are they behaving differently, would you say, then they did in 2000?
Is there more caution perhaps, or are we seeing similar speculative patterns?
It’s so hard to say because our, in those days we were really prop traders with this like little side business of this offshoot web-based brokerage. So, I don’t have the frame of reference. I wish I did but I don’t.
Although I would like to offer a little counterpoint, not push back on what Scott and Jeff said, because it is indisputable that the companies that are leading this rally are earnings and cashflow generating machines. But what started to bother me now is the circular dealing that we’re starting to get into. And ultimately, the company, in the deals that have led to, Oracle and AMD shooting up it all revolves around OpenAI and their halo effect and their access to capital. And so, I’ve asked the question several times, how does a company with $12 billion annualized revenue effectively commit to spending $300 billion over the next five years? Where does that come from? And I happen to mention this on the radio the other morning and the other guy, when I walked out into the green room, who was a professor at Yale and he was like, “yes, nobody says this.” He goes, “I calculate a trillion dollars is necessary to build out AI.” And you do have to wonder where is this coming from? And especially, it’s fine when it was Microsoft and Meta and Amazon buying chips from Nvidia because yes, that’s circular, but ultimately, we know where that money comes from.
It gets a little bit different if we’re gonna have to rely on the capital markets to finance this. And Jeff, you made the point, you know about which companies are profitable coming in. So were Global Crossing. So was Northern Telecom, so was Lucent, so we believed was Enron. And so, we believed was WorldCom and these companies, just as there’s the rush to build data centers, these companies were rushing to build bandwidth in the late nineties. And I will stipulate that the bandwidth was necessary. It was required, the internet was everything that we were promised and then some, but there was certainly some bumps along the way, and I feel that’s the stage we’re in now as we is we’ve outkicked the coverage to a certain extent in terms of some of the enthusiasm.
Can you guys recall a situation where a piece of good news from a stock from a huge cap stock like an Oracle or an AMD would take it up 30, 40% on one day? I don’t recall this. And that’s where I’m starting to get a little fudgy.
Not without it being an acquisition.
Yeah, short of that, Scott, you don’t recall this, you’ve been at this a long time. Jeff, you don’t recall this, do you?
No.
I even I’m thinking is that there’s a merger, never mind. I’m thinking the AOL – Time Warner, but that’s a merger. So that’s, to Scott’s point. Andrew’s point, exactly. But yeah, no it’s like irrational exuberance, right?
Yes.
I don’t wanna use that term, but I’m just saying that, let’s call ’em high levels of enthusiasm, shall we say. “Irrational exuberance” — that, like “transitory” was a big misspeak by the Fed. So, we’ll leave that one aside.
Yeah I think down the road, whether it’s 5, 10, 30 years down the road, this, that move that we saw in Oracle is going to be a case study that people are gonna look at and say, that was one of those events that maybe shift the landscape in this market. Moves like that on smaller cap stocks.
Steve Sosnick: Yeah. And in, in the case of AMD where there’s really not muchmoney, basically OpenAI’s halo is allowing them to basically be given stock for free in AMD, but yet the stock rallied 40%. So, there’s a lot going on. And by the way, in these smaller caps, you asked about customer activity, Andrew. It’s become fairly routine to see stocks go from 2 to 25. They eventually settled back down in most cases, but the amount of just, I’m not saying buy and hold, buy and chase that we do, that we see in a lot of smaller names is very prevalent, although that’s more of a sideshow than the main event.
Yeah. Jeff, let’s come back to you. You mentioned earlier about the differences, the fundamental differences in the marketplace that have changed from a regulatory perspective. How has the regulatory environment evolved since the dotcom bust? Are there are current safeguards sufficient to prevent a similar collapse?
Obviously. People are always ahead of regulatory, always gonna face these challenges, right? So there, there’s more retail probably trading now than there was in the past, just because it’s so accessible, right? People have phones that weren’t really back then, people didn’t have cell phones like that.
We do people, trading costs have gone down. So, I think there’s always gonna people out there that can. Find the, the blind spots and take advantage of those gaps. So, the SEC is always gonna play kind of playing catch up. I think the real question is whether or not it’s anything that, are the guardrails enough to prevent any kind of catastrophe or are they not enough is something else bad is gonna happen? Hopefully there’s a lot of smart people at the SEC and other regulatory agencies. And I think at the very least there’s enough guardrails in to prevent any kind of, we’re not kinda like a crash 1929 or anything, but there’s always gonna be people that are smarter, that are motivated by profit, and they’re going to find those gaps. And anytime that happens, it could really amplify and it’s gonna amplify the market volatility. And that could create a significant correction at any point.
Scott, lessons learned. What lessons do you think from thedotcom bust? What do you believe are the most relevant to investors today?
So, that’s a great question because my mindset is always the trader mindset as opposed to the investor mindset. That being said, I think when you get into a situation where you do see stretched valuations, and I’m not saying that necessarily because we’re at all-time highs right now. There’s stretched valuations. Maybe there are. Maybe there aren’t there. There definitely were in the dotcom bubble. It is always prudent to me. It is always prudent. This has been my mindset since day one trading on the floor. To have the opportunity to just have some protection in your pocket. So, for investors, does that mean, have some downside in a portfolio while you’re holding long positions elsewhere?
Yes. For traders, does that mean that, you can have 20, 30, 50 bullish positions, but still in your pocket have that insurance? Whether it’s downside puts in one of the indices or maybe some upside VIX or whatever it might be. Yes. And I think what traders especially don’t understand is you want to have that insurance and you actually hope that it goes out worthless.
You hope that the insurance you bought that maybe was on sale when things were relatively cheap from a volatility standpoint, you hope that goes out worthless. Just like when you buy your car insurance, your homeowners, whatever it might be, you hope you never have to use it, right? And so, I think the lessons learned from back in the dotcom bubble.
Would that maybe everybody is a little bit more cautious now, though. Some ofthe traders that I still talk to maybe haven’t learned that lesson properly. But I think from the institutional side and Steve, maybe you can speak to that a little bit better. I think that warning from way back when still resonates.
All I can say to that, Scott, is, “Amen.” My mantra has been “don’t fight the tape, but you need to insure against it.” And you hit all my usual talking points. You could tell we came from a similar background and mindset.
I will say that I was at an institutional conference a couple days ago and basically the mood in the room was, “we know this is stretched, we know this is difficult, but we can’t go back to our clients underperforming the market.” The FOMO from that room was palpable. And it was interesting. That was definitely an eye opener to me.
That these people think, if you’re an institutional manager and you don’t wanna underperform your benchmark or underperform your peers, you have to hold your nose and do this, which would be the perfect opportunity to say, “okay, if for professional reasons, I have to own this stuff, but I’m not comfortable owning this stuff.”
How about insuring against, how about using some insurance? And like you said, we don’t want our insurance to pay off necessarily, but you, but it lets you sleep better at night if you have it.
For sure.
Final question for everybody. I think we’re all of the same volition here that the market is potentially overvalued. Everybody’s talking about that. But let’s stay with Steve. What signs would you be looking for a potential correction?
I think some real slippage, I think right now, I looked over the market as we’re taping this and we were higher and, my mindset was why are we higher? And then I realized, we’re open, so of course we’re higher. It’s a business day, so why wouldn’t we be?
I think, I actually was doing something involving the crash of ‘87, which was not really germane to this necessarily. But I realized that there were some real warning signs ahead of that. We haven’t really seen that in terms of the end of the momentum trade or the willingness of investors to not buy dips, the willingness of people not to chase rallies, the willingness of institutions not to hold their nose and buy. I think you need to see that. My big fear though is that because everybody’s been so conditioned to buy dips, number one, the half-life of dips is getting incredibly short.
They’re short, shallow and are gone sometimes gone by the end of the morning. But the second part is, when there is that first leg lower, people are gonna rush in to buy. And that’s gonna be scary, I think to some extent because, if there’s a real wave out of this stuff it’s difficult to know in this environment when a large wave is actually a tsunami.
And we won’t know that. I think we haven’t as of now. As much as I’m concerned about this, I can’t just say keep shorting the market or anything like that because you’re gonna get blown up.
You’d be hurt.
If you want to short the market, do the opposite, fight the tape, but have insurance using upside calls, so that you limit your losses and so that you can participate. I do think that’s being used by institutional investors in some extent. Scott, correct me if I’m wrong, but skews are relatively flat historically because I think there’s this and I wouldn’t say it’s less because of a demand for puts. I think that’s always there. But I think it’s also just the, that’s FOMO insurance is upside calls.
There’s no doubt about it. I think there’s also a bit more sophistication in the marketplace and many more ways that people can hedge something. But you’re right, Steve. Right now, and again, we can call it FOMO or not, you’re seeing that to the upside. And that’s historically when we’ve seen that, during the meme craze, whatever it might be, that chase for something, that’s typically where we’ve seen the market maybe get into some troubles, whether it be short term or long term. So, I definitely agree with that
Good.
Yeah, and I would just, yeah, I would just add obviously the theme of this is there’s 7-10 stocks that are really pulling this market up. But we have earning season coming up starting next week really in, in full force with those banks on the 14th.
And, let’s see what every company has to say and look at these corporate, profit margins and, see what these CEOs and CFOs have to say about where they think their particular industries are going, right? So if 10 stocks are doing great and let’s just say someone in the oil and gas industry, or all the oil and gas companies are saying, we got some problems coming up, like maybe that’s a little bit of a sign to say, okay, even though the market’s coming up, maybe we need to worry about the 85% of the stocks, the sectors that may not be doing great.
Jeff, you might need to fact check me on this one, but is it true that there’s typically a market crash when the Philadelphia Eagles win the Super Bowl?
So, there’s just chaos in the street, Andrew. When the Eagles win or when they lose, it doesn’t matter. Just chaos either way. Steve will attest to that spending some time in that great city of ours.
Jeff Praissman, Steve Sosnick and Scott Bauer. Thank you very much for being my guest today.
Thank you so much. Great to talk with you guys.
Thank you very much.
All right, and to the audience, I hope you’ve enjoyed today’s edition. And remember, if you did subscribe wherever you download your podcast from.
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