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Nasdaq 4000 — This Time It's Different?
Hugh Pickens DOT Com writes, quoting USA Today "The NASDAQ has topped 4000 for the first time in 13 years, but much has changed since then. ... Tech investors in 2000 were right about the possibilities of the Internet and mobile computing. But they were dead wrong about which companies would be in the vanguard ... The recovery of the NASDAQ has been a complex tale of creative destruction, where old companies that once fueled the index have been pushed aside by new players. Back in 2000, Microsoft, Cisco Systems, Intel, Oracle, and Sun accounted for 8.9%, 8.5%, 7.1%, 3.6% and 2.6%, respectively, of the value of the NASDAQ composite. Today, companies that were just starting out or didn't even exist — think Google, Amazon, and Facebook — are in the top 10, accounting for 4.7%, 2.7% and 1.5% of NASDAQ's value. Microsoft, Cisco and Intel's weight has fallen sharply. Apple, which wasn't in the top 10 in 2000, is a behemoth at 7.9%. So is the NASDAQ enjoying a long overdue catch-up with the rest of the market, or is the broad market overpriced, with the NASDAQ being pulled along for the ride? 'The reality is that the only thing that's the same from Nasdaq 4000 in 1999 and Nasdaq 4000 in 2013,' says Doug Sandler, 'is the number 4000.'"
Adjusted for inflation the NASDAQ isn't worth any more than it was 13 years ago.
Now it's bound to trickle down to us, right?
The cow says "Moo." The dog says "Woof." The Timothy says "Thanks, valued customer. We appreciate your input."
The NASDAQ won't be meaningful until the overvalued stocks are down to prices that reflect the value of their business and business plan. If you don't think Facebook is overvalued, then tell me, what is their business plan? That's OK, because nobody who works there knows what it is, either. They are rapidly approaching the end of their hype. Once the shit hits the fan and investors want to see profit they will go the way of plenty of other dot-com bombs.
Damn_registrars has no butt-hole. Damn_registrars has no use for a butt-hole.
How nice is to have private bank's cartel that prints and prints the money like there is no tomorrow.
Stocks up, profit up, US people deeper and deeper in debt.
Perpetuum mobile for Wall Street.
...but don't tell everyone, just me.
If you can predict its future behavior, it's not a market. "Technical analysis" is today's astrology, and like yesterday's astrology, it works only so long as you're surrounded by believers.
That said, there are ways to reliably outperform the market:
I've got money in the market, because in general it outperforms other investments over the time horizon I'm facing. But I don't delude myself that I can outrun the pack.
I think the world is starting to wise up. The idea that the market is anything but a casino has taken root. It is demonstrable that the current highs in the market have little to no effect on the rest of the economy as [real] unemployment continues to grow, as businesses continue to decline, as welfare programs grow and on and on. Is the word recession or depression? I can never quite tell the difference and it doesn't help that the media and the players making money in all of this are in complete public denial over all of this.
The pedestrian banks are going to begin charging customers for keeping their money in accounts as interest rates are lowered to the point that lending profits are too low for operations to continue.
All of this and they have the gall to report on the market's activities as if it represented the economic health of the nation or the world? This reality is too big to hide any longer. This is especially true as the house votes to restore the conditions which trashed the world economy back when things really went bad before. It has passed the house but not yet the senate. I can't imagine what these people are thinking except that they don't care about the larger economy in the slightest and that's pretty much the 99% of us.
Again, the answer is 'no'. Some people think the age of the companies is different, and the problem last time was too much faith in fuddy-duddy old companies. No, they were just in the position to be riding high on the influx of VC to all sorts of new, not established startups that had to buy their hardware and software from *somewhere*. The bubble popped around the new companies first, not the old. The big, 'old' companies suffered the downstream effects of that bubble going away.
Again, we see the signs all over the place of the late 90s. Massive investment in endeavors without any sign of profitability yet and not really a good sign of how profitability will occur (hello Snapchat). Lot's of 'new blood' with money being spent under the assumption that 'oh, these whipper-snappers are refreshing, new, and might completely change the world *this* time for a long term and better be a part of that'.
The bulk of Amazon's success is still yet predicated on operating on razor-thin margins (and you already see investors grumbling). Their EC2 unit is currently the beneficiary of the same dot-com rush that the 'old' companies benefitted from in the late 90s. Facebook I'm not quite sure about, but it does seem to be a potentially troubling sign they feel they have to shell out billions frequently in order to stay 'cool'. Google and Apple are about the only one of the mentioned three that I think has an undeniably working business model without a huge sign of long-term problems (well, except for 'growth' might plateau since there is only so far they can go). I do think in another economic downturn, Apple would go down pretty hard since market tolerance for premium brands gets hit hardest.
XML is like violence. If it doesn't solve the problem, use more.
This runnup is mostly QE - the Fed printing money - and also the fact that corp profits are at record levels.
But it can't continue forever. I don't see in the fundamentals how corp profits can continue their upward trend. Corp America has cut expense to the bone and getting anymore productivity increases out of their employees just won't happen.
As far as QE is concerned, that money is being borrowed by the hedge funds and other institutional investors very cheaply and funneled back into the market - among other investments like housing. But whenever "tapering" is mentioned, you always see a sell off.
But that's the market.
As far as the economy in general is concerned, we are not recovering - we are recovered. This is all there is, folks and the policy makers are too chicken shit to admit it.
So, what does that mean? As soon as corp profits slide, expect a bit of a sell off but not a crash because all of this QE has inflated asset prices Although, if interest rates spike, there could very well be a huge (20%) correction.
At the scale of the US economy, it's important how people 'feel'. If people feel like things are crashing or will crash, then things will crash. If that means 'printing money' to make people *feel* like things are good, then so be it. Obviously you can't do that indefinitely, but if you have no flexibility then things have historically proven to bubble and crash.
It does mean that comparing most economic indicators is not necessarily apples to apples, but if people *feel* like it is, and it makes people willing to move money, then it does have some value. The key is finding the right balance between inflexible metric, mob rule economy, central manipulation of the markets, etc.
XML is like violence. If it doesn't solve the problem, use more.
I cashed out of the equities the afternoon that putz dubya signed the tarp. I doubt I'll ever be back.
IOW: "I got scared, cashed out at nearly the lowest point possible, lost a ton of money, missed a historic run-up and now I'm bitter!"
I use CDs as a place to park money for semi-long times. As an investment, meh. I've done worse [1].
These days, I focus on stocks that are stable, tough to kill, and don't feel bad ethically by owning them. RedHat comes to mind, because they actually expand the "pie" and make new things.
I also have done some personal loaning. A couple thousand lent to a farmer so he can increase his animal head count and have plenty of fowl ready to slaughter come T-day is one example. A bank wants to charge 15% APR, I do a loan for 5% APR, simple interest. To boot, I don't even have to worry about collecting if it isn't paid [2]. Come tax time, I toss the interest income on the 1040, call it done.
[1]: GM stock, now that was painful. Since the old stock was turned into bankrupt pieces, and new shares issued, it was a true loss.
[2]: I make it known that after six months, I charge the loan off my taxes, which means that the IRS will go after the person I loaned to, as the debt will be considered income, thus taxable. The threat of the IRS being sicced keeps the checks coming in far more than the threat of turning it over to any collection agency. This isn't a risk-free business, but it is a way to make money... and actually help the local economy, something that banks have stopped doing.
The danger here is that there is some speculation involved, but if not for the Quantitative easing, we may well have been on the trajectory to a repeat of the great depression. A lot of theory suggests that such moves globally might have averted the great depression. You are right that bubbles and crashes to some extent is not bad, but no one can deny that the great depression was bad.
This is not to say governments should feel they have free reign to print money (see Germany post world war i, the confederate states of the U.S civil war, and recently Zimbabwe). We love it when a problem and solution are straightforward, that one 'pure' philosophy is the correct thing (e.g. inflexible 'money' supply is a popular cause for people to rally behind), but the truth is that there is a lot more subtlety and a middle road must almost always be sought.
XML is like violence. If it doesn't solve the problem, use more.
This is a Wall Street recovery, not a Working Man recovery. Keynesian is an epithet nowadays, so instead of going the 1930s route and investing in infrastructure and public works to put working stiffs back in the field, we elected to dump money on Wall Street until the investors felt happy enough to start diversifying out of their tortoise shells. No one should be surprised that the effect is great stock prices and mediocre, trickle-down improvements in the economy everywhere else.
These index milestones are irrelevant except for the fact that the trickle down effect might raise the flow up to Babbling Brook.
I swear to God...I swear to God! That is NOT how you treat your human!
Buying individual stocks is a sucker's game. Basically you are taking on something that the statisticians call uncompensated risk when you do it. That risk is why you only made 9% this year.
Much better to invest through low cost index funds.
Eugene Fama baby. 2013 Nobel Memorial Prize in Economic Sciences.