USA Today starts year with bearish article on NASDAQ
Maybe this means the bottom is near ^_^
usatoday.com
Investing lesson proves costly
By Adam Shell, USA TODAY
[...]
The Nasdaq composite, the tech-heavy index that developed a cultlike
following after soaring 86% in 1999, suffered a monumental collapse in
2000. Its 51% plunge from its March high ranks with the legendary stock
market crashes of 1929 and 1987.
"A lot of tech investors who became rich in 1999 became poor in 2000,"
says Hugh Johnson, strategist at First Albany.
How poor? It was the worst beating tech investors have taken in a quarter
century [...]
The Nasdaq plunged 39.3%, its worst year in its 29-year history. To find
a worse year for a major U.S. stock index, you have to go back to 1931,
when the Dow Jones industrials fell 52.7%, and the Standard & Poor's 500
fell 47.1%.
About $1.9 trillion of stock wealth vanished as measured by the
Wilshire 5000 index.
[...]
Before the bear market, which sliced the value of the Nasdaq in half since
it peaked last March at 5048.62, Wall Street pundits worried aloud that
investors new to the stock game had never seen a bear market. As a result,
many people happily took on way too much risk.
That innocence served investors well when dot-coms and other tech
stocks were sprinting to new highs. Rampant speculation temporarily
pushed shares of new companies that had yet to post a profit, and some
cases even revenue, into the stratosphere.
[...]
Where did the bulls go wrong? They were overly optimistic in their
earnings projections, especially for tech companies. Analysts have been
slashing estimates. Fourth-quarter profit growth for the S&P 500 has
shrunk to 5%, vs. 16% six months ago, says I/B/E/S International. They also
erred in concentrating the bulk of their assets in tech stocks.
But the genesis of the bubble dates to the summer of 1998, says Richard
Hoey, chief economist at Dreyfus. That's when the Federal Reserve slashed
interest rates to avoid a global financial meltdown in the wake of the
blowup of Long Term Capital Management, a hedge fund.
The massive injection of liquidity fueled an economic and profit boom.
The Fed pumped more cash into the system at the end of 1999 to avert a
potential Y2K-induced credit crunch, further revving an already
overheated economy. Things got tough when the Fed "turned off the
spigot," Hoey says.
[...]
The biggest worry facing investors now is the alarming speed at which
profit estimates are coming down, says Margolies. "This is the most rapid
deceleration I've ever seen," he says.
[...] |
