February 28 - For Better Or Worse The Future Is Nasdaq
Even after a 16% drop from its high set back on January 14,
the 30 stocks making up the Dow still look expensive. Odd, I thought the "new paradigm" meant investors always pay
more but apparently this is not the case unless your ticker lives on the Nasdaq.
Believe it or not, the Nasdaq has just recently went berserk. Up until mid 1995 its gains we strong but not even
comparable to the last 4 ½ years. Nasdaq 1,000 and 2,000 were applauded as grand achievements over the coarse of 3 years but by comparison in less than two months (November - December 1999) the Nasdaq has
seen its way through 3,000 and 4,000 with no problem, and many are calling for Nasdaq 5,000 and even 6,000 by years end.
Nasdaq World
The rise in Nasdaq isn't a self-contained phenomenon. Over the last 10 years the weighting of the S&P
500 (broad landscape of stocks) has been slowly switching to a higher tech weighting and as recently as four months ago the Dow caught on bringing in two Nasdaq powerhouses in Microsoft and Intel. The switch to
a greater technology and eventually internet weighting is inevitable but what is interesting is that big cap Nasdaq stocks continue to soar and help everything they touch. From 1999 to present over 50% of
the gains on the S&P 500 have been due to the combination of 8 Nasdaq big guns. And even though Microsoft has been lagging as of late it is still stable compared to the Dow stocks taken out and the perky
Intel has risen over $30 a share since it joined the Dow 30. There is nothing wrong with placing the best Nasdaq stocks into every possible average and over 80% of the mutual funds in America, nothing
wrong with this at all. But if prices in a handful of stocks continue to rise while the vast majority of stocks continue to fall, perception is what is impacted and distorted.
Perception
We live in a Nasdaq world. The reaching power of new
and old Nasdaq stocks will continue to proliferate in the coming years as the economy becomes even more technologically and internet based. N-stocks are sold to investors at every turn and as long as demand
for equities remains strong the prices will rise until the bubble violently bursts.
Forget that short sellers have been killed off one by one and Wall Streets secret code is to never say a bad word
about tech. Forget that actual diluted earnings in a bellwether like Cisco are up less than 100% from year end 1997 to 1999 while the share price is up 900%. Forget everything!…and then you will be close to
understanding all that is Nasdaq, and for better or worse investors will have to live with it.
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