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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.
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.
What rapid devaluation? The one happening inside your head?
Here in the real world, inflation has been less than 2.5% annually since 2008, lower than in any similar period in at least 50 years.