Dr. John Faessel
ON THE MARKET
Commentary and Insights
Quote of the day
“The fate of the world economy is now totally dependent on the growth of the US economy, which is dependant on the stock market, whose growth is dependent on about 50 stocks, half of which have NEVER REPORTED ANY EARNINGS.”
~ Paul Volker ~
Former Chairman of the US Federal Reserve
Made that statement in the summer of 1999 when the Nasdaq was at 2500, later to top at 5132.
Anybody out there remember the stock market bubble of all bubbles? And the subsequent crash, or did we forget about it already? And that mess?
Recall that in October 1998 the Nasdaq traded at 1357.
In March 2000 it topped and traded at 5132.
That’s up 3,775 points over an 18 months period, or up 278%.
The Index was inflating at 210 points or about 15.4% a month.
The Semiconductor Index (SOX) went up 748% or 41% a month during the same period. That’s 10% a week or 2% a day.
The NYSE and NASDAQ had lost $9.3 trillion in market-cap at the lows of October 2002.
The Market (bubble) peaked on (Dow Jones average) January 14, 2000 and the Nasdaq on March 10, 2000.
President George Bush took office on January 10th 2001. THE NASDAQ WAS AT 2450. Today the Nasdaq is at 2,459.67; still less than half of what it was in 2000.
Now! Think of the trillions from the appreciation in market cap during the late 90s. Now, think of the taxes and capital gains that came to the US Treasury because of the bubble mania. It was all “funny” money in a way. But the gains were real money and taxes were paid on it and it was the source of the oft referenced $200 billion surplus when Bush took office. Oh - how wonderful it was for the administration and how "its" pointed to today (by our inept media) as such a characterization of the cool, studied, calculated and brilliant results of the wondrous policies of the administration that was in there at the time; Bill Clinton was President as I recollect. Hokum!
So, talk about Obama inheriting a big mess, now wait just a minute.
Think about what the Bush administration inherited? Once again; the bubbles collapse ripped $9.3 trillion out of the stock market alone, not counting the disaster that hit home sales and real-estate in general. Maybe, not as much as the real-estate bubble that blew in 2008 and 2009, but it was still the biggest stock market hit since the stock market collapse of October 1929. Anybody out there remember Intel (NASDAQ:INTC) at $75? Or the 1000+ dot com companies that went bankrupt?
Also, there was a little recession caused by this tremendous collapse. And, there was also that little item of 9/11 that seems to be forgotten, or maybe it's just too horrible to recollect by the media? And then the wars; Afghanistan / Iraq. And terrorist acts out the ying over many years before that, including the bombing of the World Trade Center the first time and the market hit that occurred then? And the 17 UN resolutions that included military action against Iraq the second time?
My quintessential remembrance of the time was the day when Qualcomm, (NASDAQ:QCOM) was upgraded with a price target of $1000 - and the stock went up 60 points in a day? Today (QCOM) is $43.98. It was Walter P. Piecyk, analyst from Paine Webber who in what must have been a fit off of a Krispy Kream sugar rush said, “I’ll raise you a 100 points and put a 1000 target on (QCOM).” Even off that preposterous call the Internets bubble stocks and the market over the next three-months went higher, and higher and higher. Until they reached the sky. Then the slow reversal to near oblivion.
Observe in the charts (below) the stupendous collapse that occurred when the bubble blew; then note the hit was taken in 2007, 2008 and 2009;
Intel (INTC) $19.76
Semiconductor Index (SOX) $349
Hello! Talk about a mess…
Disclosure: no position