Does anyone recall the very peak of the nasdaq in 2000? What happened that day? Was there suddenly a sea of red sell orders during the moment of reversal? I wasn't trading at the time so I wasn't able to witness it.
It's all a big blur for me, but what I do remember well is that the exact moment of reversal was an announcement by President Clinton in mid March 2000 that hit the biotechs really hard: "In March 2000, President Clinton announced that the genome sequence could not be patented, and should be made freely available to all researchers. The statement sent Celera's stock plummeting and dragged down the biotech-heavy Nasdaq. The biotech sector lost about $50 billion in market capitalization in two days." http://en.wikipedia.org/wiki/Human_Genome_Project
It depended on what you were looking at. SPX fell over a period of 2 YEARS to go from 1525 (Aug 2000) down to around 800 (July 2002). But in Jan of 2000, it 'only' lost around 200 points. Nasdaq was more rock-like, it fell 1500 points from 5000 to 3500 in about 10 days in Jan of 2000, but kept falling also til mid 2002 where it was around 1100 (these figures aren't precise, but close). The DJ Industrials on the other hand never grew much, so didn't fall much either (these were the days when everyone made fun of Warren Buffett and there were many articles saying he was going to: a. go bankrupt, b. shut down Berkshire Hathaway, c. become a hermit). Back in that time, the DOW barely moved til around 2001, when it dumped from the high of 11500 in 2000 to 7500 briefly in 2003 (briefly was a 1000 point dump over the summer of 2003, and it recovered. The DOW Ind was the only major stock Index to actually achieve a real 'new high'). You can look these charts up yourself. Did it happen fast? Yes and no. Yes, because no one expected it, so everyone kept buying the dips as they dipped lower and lower, then selling and reentering for a long time (3 years), losing a lot of money unless they were short (tho the volatility played havoc with shorts too). I seriously doubt many people who were in the market long stayed out for 3 years totally except those who lost it all to begin with on margin calls. No, because it didn't happen in a day or 2 days. The SPX for example only fluctuated 200 points in the entire year of 2000 because of dip buying before anyone began to give up. 2002 was terrible, 2003 was obviously the worst before the bull began again. By 2002, most people had already given up, which is what led to the total capitulation in 2003. Are we heading that way again? Maybe... maybe not. In either case, it's not going to happen overnight. But because it doesn't, if it's happening, it's very very hard to get out, because you confuse dips with actual drops. Sort of like we saw the last 2 days, then you have an up day, then a down day with lower lows. But, you had some real spikes too throughout. Enough to commit more $$ to lose into. The reason it can be so misleading is because during the full bull run, the market would regularly have VERY large corrections (like we really haven't even seen in the last few years), before resuming the next huge run up. And there were a lot more bear sentiment than you see now before the crash in 2000. It was absolutely not the scenerio often painted, that everyone was a bull. Nope. You had people crying that the sky was falling for the entire 3 years of 1998-2000, and a LOT of people seemed to completely miss the run til the very end (like most mutual fund managers and newsletters, who called the market irrational exuberance and other frothy terms before Greenspan did). Look, if everyone could have seen it coming, it wouldn't have happened, or it would have happened a lot more precipitiously. It wasn't a real 'crash', as in a one day event that you slog off and a week or 2 later, it's heading back up, and a year later, your longs actually gained (like the 1987 crash... I didn't expect it, but big deal, a year later, I was ahead of that point again). It was a slow, demoralizing seep downward, that most people held hope for a recovery for months and years. I'd take a 'Black Monday' anytime over what happened in 2000. Keep in mind that Nasdaq's high was 5000... and it's still not 1/2 there and it's been 7 years since the fall began. If you look at the major stocks of NASDAQ at the time, most of them are not even close to their 1999 highs, and many still at 1/2 (following the index). Ie., what makes Google a better deal than Microsoft? Microsoft has no infrastructure to maintain, it's software and disks cost $.50 each, and on 80% of the computers in the world. I haven't seen the manpower figures, but I doubt it's that much of a contrast. No operating system gives it a real run for the money. Google doesn't approach Microsoft's saturation, has competition (Yahoo? Answers.com, AOL, and a zillion startups), I know plenty of people who have Windows, who don't use Google. So why is Google nearly $500 and Microsoft nearly $30? It's ludicrous that Google has 1/2 of Microsoft's valuation. Microsoft's at 28 P/E, Google's at 250 P/E. Cuz Google doesn't leave people remembering their 2000 losses? Amzn, Yahoo, Csco, IBM, Lu, etc etc, none of these have recovered. People are afraid of them for the most part. But Goog wasn't public in 2000, no ill-will or paranoia attached there (yet). It was incredible to see a stock like GLW (Owens Corning, you know, the glass company that made and still makes Corellware- that probably every household in the US has had at least 1 set of cuz it's awsome and hard to break? You know, the insulation that goes in most homes and businesses in the US, which most energy efficient homes have a minimum of 30" worth in their roofs alone? You know, the company that makes the glass for Plasma TV's and LCD screens?) drop to $2 a share. $2. At that time, they had like $30 million CASH doing nothing in the bank, and no debt. But their stock was $3 (can you tell I bought a lot of $3 GLW? I didn't catch the bottom, but close enough) Then I think Google? Hrm. Don't underestimate what CAN happen. And even if it doesn't happen now, or this year (doubtful), it is gonna happen. It's how much $$ we can make before it happens, and if we're smart enough or lucky enough to get out after it happens (because no one knows when it's going to happen). I'm not a bear yet, but I'm getting paranoid.