If we assume that major technology waves tend to come along ever 40 years or so. And bring an investment boom with them, I think its fair to say we will not see another major top on the NASDAQ untill about 2040. This will probably be the result of some new technoloy wave that will drive the sector forward. Nuclear fusion, Anti gravity travel and quantam computing / artificial intellegence will most probably drive the next tech boom in my opinion. In fact I dont think we will see much upside in the NASDAQ for at least 10 years. Look at the Nikkei as a model. 10 years on its at 25% of its all time high. That was the last significant technology bubble before the NASDAQ. On the NASDAQ you still have stocks that are leaders in thier sector trading at 200 times earnings. You'd have to own these stocks for 50 years before they paid for themselves, and by then, new players will have new technology and todays leaders won't exist, just as the same companies that created the post war boom or the 1920s boom don't exist today. So most of these types of stocks still have a long slow painful death ahead of them. After the 1929 - 1932 bear market when you take away inflation it took 10 years to retun to its real ATH value. That was a technology boom. During that time the NYSE had more than fifty listed car companies - all trying to become a major play in the booming car market. All but three I think still exist. So as you can see, Im laughing hesterically at all those still buying NASDAQ shocks as long term investments. The paridigm has shifted and those that haven't help shift it are going to end up very poor. Runningbear.
As you know, and Buffet mentionned a standard progression of about 7% is what we observe usually. If you said that technologies drive more volatility and growth than other std business, and a conservative 9.5% of growth by year, after 10 years you have reach 250%, from about 1500 you should observe easily 3750 at this time. Now, at 11% by year, you have your 5000 on the same period. It is realistic? If not, the USA will be in trouble, because the technologies drive a large part of job since 20 years, and their competitive hedge is based heavily on this sector for new jobs. Without it, they will lost their productivity level as the leader they are now and it could be futur pain decade not only for the market but also for job, because many new jobs are drived directly from the money that the market will supply at these corporations. Just an opinion.
We live in a hyperspeed society now. It is very different than years past... WCOM droped 97% in one day... Stocks shoot down and up very quickly in tech land... I see Nasdaq 3000 in 18 months... I am not very hopeful for 5k any time soon but I do see much higher levels than we are now.
I agree with most of what you said, but, all the same, it's worth remembering what happened to perhaps a handful of "glamor" stocks from the 1920s. One of the more well-known examples, because it was mentioned by Loeb in THE BATTLE FOR INVESTMENT SURVIVAL, is Technicolor - owner of a hot new media technology that for a moment, to believers, looked like it might take over the world, or at least the motion picture portion of the world. People tend to assume that all stocks crashed at the same time back in '29, but then, as now, some stocks peaked and began to fall well ahead of the general market top, and others didn't crash until well after. Technicolor made its high of 86 1/2 in 1930. Within a couple of years, it was trading for 5/8, as in 0.625 (sound familiar?). But five years after that it peaked again at 34 -- a nice move, to say the least, from 5/8. Though the majority of "fallen angels" may never fly again, and a large number of them may either go out of business or languish at very low prices for years, I have no doubt that, amidst the widespread tech wreckage, there are a few Technicolors. Loeb gives a few other examples from the period, including fallen "blue chips" and others, that made similar huge percentage gains from their lows, even if they never re-approached their mania highs -- NY Central, a railroad company, going from 257 to 9 to 88 over the course of some 8 years, that kind of thing. In a world where average market returns may be negligible if not negative, searching out such stocks can be very profitable, with or without revolutionary technologies, a total market resurgence, or even a strong economy and favorable political environment.
You are right and a point that I've pondered is that those companies that never rise from the ashes again will ultimatley be replaced by something new. This, in theory would keep a technology index propped up. We are no where near the panic and banking crisis that previous bear markets have been associated with, yet anyway. We know the Nikkei is way off it's peak and that bubble was driven by property valuations. Land is land and you can't make any more of it but pure technology can be re-invented (or is illusionary if you prefer) so the regeneration of the cycle is much shorter. Not many believed that the Nas would go from 5k to 1.4k in 2 years and judging by the poll, not many believe it could do the reverse in the next 2 (including me) but we cannot say it's not possible. Not probable maybe but not impossible. If you go to the birth place of the industrial revolution that same effects were in place then. Where I live we are still surrounded by mills and canals that served the 'new paradigm'. The boom bust cycle of industry then was just as violent as it is now. Everytime a new venture went bust it was no time before someone else came along and started it all up again. BTW, if you can, pay a visit to the Manchester, Birmingham area over here in sunny UK. A few days studying local history and visiting museums is a fantastic eye opener into the original workings of modern industrial development.
I would never, no way, have bet that the market would go up yesterday. Every time I think I know what the market is going to do I get a lesson in humility. If I cant get it right for one day I sure as heck am not going to try a longer guess.
i was surprised yesterday that there wasn't a sell off near the close. although the chances of an attack are probably very small, i still thought people would sell some longs before the close.
There is one thing that nobody has touched on yet. The indexes are what we are talking about here and not the individual stocks. How many of the Dow 30 even existed in 1929? I think 1, which is GE. That is nearly a 100% replacement. And the Dow is the stodgy slow to change index. The same thing will happen in the S&P 500 and nasdaq 100 except a lot faster. In as few as 5 years there will be a near 100% turnover in the Nasdaq 100. In two years time there could be a 50% turnover just due to bankruptcies and mergers.