The Nasdaq Is History
By Dan Gebler
NewsFactor Network
April 4, 2001
One of the quirkiest dilemmas
surrounding the skyrocketing success
of the Nasdaq exchange during the
high-tech boom times was that when
the Comp shot through the 2000
barrier and orbited into the 4000 and
5000 levels, it became difficult to
associate the index with a four-digit
historical year.
With the Nasdaq crashing through the
17th century mark and hitting the
1680s on Tuesday, however, it's time
to welcome back the Puritans of
colonial yore.
Time Warp
Tech time has always been speedy,
and the tech-heavy Nasdaq has been
pushed up and down by the rise and
fall of the tech sector.
Throughout the early 1990s, the
index hovered below 1000 --
equivalent to the Middle Ages and
critical to those who got the early
jump in technological discoveries (body armor, battering rams and
server routers), but certainly not as noticed by the broader
public as it would be in a few short years.
In 1995, the Comp passed the important 1000 mark -- still
medieval in its date-equivalent, but inching toward familiar,
modern territory for Americans investing in tech stocks. In 1997,
the Nasdaq crossed 1500, the mid-millennial mark, and was
headed into the modern era. Enlightenment!
By 1998, the Nasdaq raced ahead of its date-equivalent for the
first time. The industrial revolution and the 20th century became
blips in time as the markets blasted into the future.
Overheating History
Investors bought it all, accelerating time and profits and heralding
the arrival of the New Economy. Having long forgotten Herbert
Hoover's boast that Americans in the "Roaring 20s" would have a
"chicken in every pot," the 20th century closed with the
oft-heard Clintonian reference to the 'longest peacetime
economic expansion in American history.'
As the calendar years read 1998 and 1999, the Nasdaq soared to
unheard of figures: 3000, 4000, and eventually, with an 88
percent expansion over just six months, 5132 on March 10, 2000.
That's when the history of the Nasdaq's hyper-drive came to a
screeching halt and, like a delayed Y2K reaction, fell into a
millennial freefall.
It has now been over a year since the Nasdaq peaked, and we
are still looking for the Comp to finally bottom out. For many, the
2000 mark has become an important psychological barrier, not
only because we've been there before but because each time the
index dips below 2000, we feel like we're taking a trip back in
time.
Been Here, Done That
The Comp re-entered the 20th century on the way back down on
March 12th, closing at a Roaring 20s level of 1923. By March
16th, the index reached 1890 and the reform-minded Victorian
era.
Just last week, the Comp has hit some of the darker days of the
19th century. Last Wednesday's close was at 1854, the same
year that Charles Dickens published "Hard Times." In 1854,
Americans were hopeful that the sectional conflict that would
eventually lead to the Civil War would "bottom out" with the
signing of the Kansas-Nebraska Act. No dice.
On Thursday, the Comp hit 1820 -- how low can you go, James
Monroe? In fact, many investors would much rather have tried to
sort out the 1820 Missouri Compromise fiasco than deal with the
Nasdaq's lowest mark in two years.
After a brief shot in the arm on Friday, the Nasdaq continued
staggering backwards through some of history's most prominent
struggles. Like the colonial participants of the Boston Tea Party
who threw tons of British tea overboard rather than pay new
taxes, investors sold off tech stocks Monday so they wouldn't be
left holding them when the market hit a new low of 1773.
Dancing In the Dark Ages
Terrible Tuesday's calamities had the index hovering around the
1680 to 1700 mark. While we'd like to remember this late 17th
century period for John Locke's theories on civil liberties, the
Nasdaq's backward slide is instead conjuring up images more
worthy of the Salem witch trials.
But just like early Americans who ultimately favored Locke's brand
of reason over the irrational hysteria of Salem, investors are now
standing at an historical crossroads. They must appeal to
common sense, recognizing not only that the index will eventually
rebound but that it is also highly unlikely that the Nasdaq will
revert all the way back to the 5th century days of Attila the Hun.
The shakeout has indeed been devastating, but only as
earth-shattering as the rise of the markets in the few years
previously. |
