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.'"

Re:BFD

[dsginter]

$4000 year 2000 dollars are now inflated to $5424 [bls.gov]

Yes, please tell where the market will go next.

[jeffb (2.718)]

...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:

• 1. Buy better (faster, lower-latency) access than your competitors.
• 2. Buy more regulators and legislators than your competitors.
• 3. Cheat, without getting caught -- or without regard for getting caught, if you've done a good job at point 2.

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.

Re:BFD

[samkass]

The Matrix came out in 1999. Remember those switchblade phones they used? That was a Nokia 8110 [wikipedia.org]... state of the art in 2000. The PalmOS phones wouldn't come out for a few years after that, which are arguably one of the first mass-produced "smart" phones.

Re:What if you could earn money on a CD?

[tjb]

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!"

Re:Blowing bubbles again?

[tjb]

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.

Re:Good news for all us have-nots!!!

[dcw3]

There's no reason you can't start collecting on that trickle at an early age. At 23 years old, I had $600 to my name back in '82, and on the advice of a broker (and remembering that my grandmother had invested in the same company) purchased 60 shares of Detroit Edison. I joined their dividend reinvestment program (DRIP), which was much better back then (no fees, and 5% discount to the market price). I've long since sold the original 60 shares, and only hold onto those that were accumulated via dividends and reinvestment...now worth about $20k.

If you participate in a 401k, chances are that you're already in the market, and enjoying some trickle.

Do some homework on the markets, it's much easier now than when I started. It's not only for 1 percenters.

Re:Good news for all us have-nots!!!

[MMC Monster]

Anyone can live paycheck to paycheck.

I have a colleague who makes mid 6 figures and still can't manage to save more than what's put in automatically to his 401k equivalent by our employer. I also know several friends making ~80K a year that are on the verge of bankruptcy.

It's called living below your means. If you can afford a 1200/month rent, pay 1000/month and put the rest away in long term savings. Put it into an ETF (exchange traded fund) and get an average 5% per year growth.

1 year - $2454
2 years - $5031
3 years - $7737
4 years - $10579
10 years - $30873

The miracle of compounded interest.

Re:BFD

[alexander_686]

And you would still have been better off investing in the NASDAQ – once you factor in dividends. The bad thing about these indexes is that forget to factor in dividends.

For the past 13 years (11/30/2000) inflation has averaged about 2.3% NASDAQ has gone up about 3.3%. Once you factored in dividends it goes up to 4.2% which is a bit more respectable. Still lower than from the peak, but still.