A question though,to you Londo,you say the market cap of those 6 need drop to zero(yikes) to bring forth a NDX100 value of 1000,does that number require that the others maintain their present market cap or is it based regardless on what the others do?
Those 6 (MSFT, INTC, ORCL, DELL, CSCO, AMGN) would need to go down to zero for an ^NDX value of 800, or roughly a Nasdaq composite value of ~1350. And this is assuming that the rest of the stocks in the index would remain steady. If the 'big 6' drop 50% while everything else drops 25%, you still have a Nasdaq composite value of roughly 1300.
FYI, the Nasdaq Composite has a total market capitalization of roughly 2.9 trillion according to the latest stats I can find. (extrapolated from $3.2 trillion when the Nasdaq was 2160 at the end of June 2001).
The Nasdaq at the end of June 2001 had 158.5 trillion shares outstanding - this is still up from 147.7 trillion shares outstanding in June 2000. Interestingly enough, there were 4790 companies listed on the Nasdaq at the end of June 2000, while 4325 companies at the end of June 2001. This information is not sufficient to make a statistical correlation between all companies and dilution, however (although if you take a look at the big 6, it's rather obvious).
The NYSE at the end of June had a capitalization of 12.3 trillion.
Imagine how much people have lost in RTHMQ.OB,NPNTQ.OB and COVD.OB,but those losses are no longer calculated into the COMPX,as they are now conveniently delisted.
Once these companies are delisted, their drop is no longer registered in the index. Otherwise lets pretend half the companies on the Nasdaq go down to zero, and then they get delisted.. the index will obviously not increase the day they are (thankfully) gone.
I disagree with your view of "Nasdaq Composite will be 1000 in a year", simply because 1000 is a rather arbitrary number unless if you can explain to me where you will lose $1.45 trillion in capitalization amongst Nasdaq stocks today. My counter-argument is that there are a sufficient number of small and midsized capitalized firms that will contribute more to the Nasdaq composite in the event that the large cap companies get fried. Most of these small and mid-cap firms tend to be more 'rationally' valued than their large counterparts, so I doubt they'll crash to the degree that the large cap ones will.
Compounding this fact as you previously pointed out is that Greenspan is printing out cash at 9% a year.. and this effectively means that if you spread the wealth, every company out there should have a 9% higher capitalization than it did last year just from this fact alone. And worst of all, this price increase is tempered by the dilution.. but of course you know dilution doesn't change the market capitalization. :)
I do agree, however, with the idea that large capitalization companies have plenty of room to fall. Since the indicies are obviously weighted towards them, this means the Nasdaq should fall. I am also of the opinion that there are good investments in any markets, bull or bear, just that it's rather unsexy to talk about boring companies with good cash flows, solid balance sheets and thin volume.
I hope this post has been informative.
(edit) PS: About your opinions of CSCO being a $8 stock, I disagree. Try $5. :) If TYCO can trade at 2.8 times sales on a 16% profit margin, CSCO's probably good for 1.5 times sales on a negative margin. :) :) |
