Nasdaq 4000 — This Time It's Different? 241
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:Good news for all us have-nots!!! (Score:5, Insightful)
Pretty on the nose there. The headline asks "This time it's different?" The answer is "yes, this time the employees aren't seeing any of the money"
Facebook is still overvalued (Score:5, Insightful)
Betteridge's law of headlines... (Score:5, Insightful)
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.
Re:Facebook is still overvalued (Score:5, Insightful)
Over the last 12 months, Facebook, had revenues of nearly $7B and profits of about $1B. You can argue that their stock is overvalued (and I'd tend to agree), but they clearly have a pretty solid business plan.
http://finance.yahoo.com/q/ks?s=FB+Key+Statistics [yahoo.com]
Re:Macro-economics is more psychology nowadays... (Score:4, Insightful)
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.
I guess, if all you have is a hammer, then everything looks like a nail. The problem here is twofold. Bubbles and crashes aren't inherently bad in themselves. They're just a manifestation of imperfect knowledge and that's not going away.
They also happen with greater severity when someone tries to game the psychology of economies. The 2007-2008 real estate crash, for example, can be traced back to nation-level policies which freed a lot of easy leverage in North America and Europe for real estate. These policies were enacted in order to recover from various economic problems of 1998-2002.
Re:Good news for all us have-nots!!! (Score:4, Insightful)
Now it's bound to trickle down to us, right?
Only if you put some skin into the game. You did invest in the stock market after the real estate crash, right?
I was fortunate enough to have some spare cash to invest. My only regret is that I didn't put more in over the last two years. It's my opinion, though, that we are near the end of the bull market. I'm thinking that interest rates will go up and the shift will be to the bond market once Quantitative Easing ends. But, I am not a professional analyst, it's just my personal opinion...
Re:Blowing bubbles again? (Score:4, Insightful)
If your 401(k) retirement savings are getting high return, they probably also have a high risk. Whether that's right for you or not depends on how close you are to retiring, but generally speaking, a modest return from a retirement plan is a safe idea. If you want to gamble on high-return stocks, use disposable money for that.
Re:Good news for all us have-nots!!! (Score:5, Insightful)
Battered down? More like bought themselves into paycheck to paycheck living.
Need proof of this? Take a look at your neighbors. If they're anything like the typical American family today they're driving a car that is worth nearly as much as their home, both of which they're still likely making payments on unless they're in their 60s. 3-4 TV, 3-4 cable boxes, 3-4 media players, hundreds of movies that they've either never watched or watched twice and will never be seen again. Smartphones for dumb kids and 60 dollar video games that have even less ROI than the BluRays and DVDs. Big cable bills for 850 channels that never get watched. Trips to Disneyland that cost more than a year's tuition for junior to go to state college. 40 dollar t-shirts with a NFL teams name printed across it. Tablets and MP3 players that become paper weights after a year because of the flawed perception of obsolescence. Half a day's wages to watch the latest CGI frag-fest with average shot lengths under 2 seconds and music/sound that's louder than a train...
We've gone crazy is what it is. We consume like we're millionaires even thought we see the bills coming in and knowing it's not going good. But no biggie... bankruptcy is there to save us all, right?
People who blame companies for what people consume are about as insightful as people who blame spoons for obesity. Markets don't create themselves without consumers. Not in the long term anyway and certainly in no great numbers. Wasteful spending is the order of the day because people have no desire to live lives that are practical and sane.
Re:Facebook is still overvalued (Score:4, Insightful)
Facebook allows a granularity of advertising targeting that was hard to get before. For example, I've been involved in a community organizing effort that had trouble getting media attention and had no real budget for advertising, and I've found that $50 in Facebook advertising targeted to our zipcode got us about ~5000 views and ~150 clicks. That was about as much participation as we got in months of free community newspapers articles, and we largely hit a different audience.
Re:Good news for all us have-nots!!! (Score:5, Insightful)
I think trickle down has always been premised on the idea that rich people and CEO's would voluntarily do the right thing with their money and increased profits. It's premised on the idea that a CEO would act in the best interests of the company and invest his profits the company's long-term future--not just go for the quick short-term profit, use it to pay himself a big bonus, and then bail with his golden parachute when the long-term problems hit. It's premised on the idea that a rich individual is going to share his wealth (hiring more servants, buying more stuff, and spreading it around)--not just horde his money and be a cheapskate fuck to the illegal immigrants he hires on the cheap to do all the work around his mansion.
In other words, the premise that trickle-down is based on is complete bullshit, as has been evidenced by over three decades now in the U.S. of watching money NOT trickling down for shit.