This market reminds me of late 2002: every day market was down, down, down. People fled out of the market and rushed into money market funds, and even its return was as low as 2%.
PowerShares QQQ (QQQQ) holds all the stocks in the Nasdaq-100 index, which consists of the largest non-financial securities listed on the NASDAQ Stock Market. Its P/E is 14.3. As you can see from the chart below, the volume was much higher in June/July 2002, before it reached its all time low in September 2002. As a comparison, Sep/Oct/Nov 2008’s volumes are much higher than rest of period. Does it mean the worst is over? Can history repeat itself? Your guess is as good as mine.
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Don’t get me wrong. I am not calling a market bottom, because nobody knows. However, I do realize that QQQQ has a very strong balance sheet. As shown in the table below, the top 5 holdings in QQQQ have total cash of over $100 billion, more than enough to bail out financial companies such as Citi (NYSE:C) or Bank of America (NYSE:BAC).
Can we live without the products those companies provide: iPhone/iPod, SmartPhone, PC/Laptop, VPN or Web search? I doubt about it. They are changing our daily life. For example, Google (NASDAQ:GOOG) isn’t just a superior search machine anymore. In recent years it has launched a dizzying array of new services and advanced into whole new businesses, from the introductions of its controversial Book Search and Google Earth, to bidding for a slice of the wireless-phone spectrum and purchasing YouTube. By broadening and deepening its results better tailored to a particular user, Google might have enough personal detail about each of its visitors that it could provide a customized answer to the questions such as “ What shall I do tomorrow?” and “What job shall I take?”, according to Randall Stross, author of “Planet Google”.
The company I work for corrects daily real time data from different search engines and shopping portals such as Google, MSN (NASDAQ:MSFT), Yahoo (NASDAQ:YHOO), BizRate, etc. The amount of data and speed available to users are incredible. Companies can adjust a keyword ad they placed in Google very readily, in a matter of hours, based on data corrected.
Guess who bought a piece of Facebook? You get the idea: these QQQQ companies are preparing for Web 3.0.
Disclose: I have long position on QQQQ.