We now move on to 2000. All of the following is gleaned from my "Week in Review" pieces. Any quotes are from yours truly, unless otherwise indicated. The bullet-point format is to give you a quick sense of the investment scene at the time.

The Dow Jones closed 1999 at 11497. NASDAQ, 4069.

1/8/00 - NASDAQ has risen 187% from the market lows of 10/8/98 through 12/31/99. It closed the first week in January at 3882. The Dow dropped 500 points the first two trading days of the year but recovered to close the week at 11522, a new all-time high. [A great opening act for the year, as it turned out.]

Qualcomm (pre-split) went from $800 to $560 in days. Yahoo! (pre-split) fell from $500 just two days earlier to below $370. Lucent issued a profits warning and the stock fell $20 ($60 billion in market capitalization).

Consensus economic forecasts have the U.S. economy growing at 3% in 2000.

Fed Chairman Alan Greenspan was re-nominated.

Boris Yeltsin stepped down.

The world handled the Y2K issue with few major problems.

1/15/00 - AOL and Time Warner announce their merger.

Alan Greenspan gave a speech: "The American economy has never exhibited so remarkable a prosperity for at least the majority of Americans." The core rate of inflation for all of 1999 is at the lowest rate since 1965. But Greenspan added that the surge in the stock market is pushing the economy beyond its limits ("wealth effect" playing a major role).

The 30-year Treasury climbed to 6.69%, the highest level in two and a half years.

Dow closes at 11722. [What would turn out to be our current all- time high.] NASDAQ, 4065.

I guessed the Fed would raise interest rates 25 basis points in February, as well as another 25 in March.

The Elian Gonzalez case was heating up. A CNN / Time poll showed that 56% of Americans said he should be shipped back to his father. 36% said keep him here.

Rudy Giuliani leads Hillary, 49-40 (same as previous September).

Carlton Fisk and Tony Perez get selected to the Baseball Hall of Fame.

Oil shot up from $24.22 to $28.02 as it looked as though OPEC would stick to their production cuts.

1/22/00 - The Fed announced they would change the way they release their reports to make them clearer; issuing new statements such as, "We think a slowdown in the economy is the greater risk," instead of just issuing a statement calling for a "tightening" or "neutral" bias.

I say the Fed should issue statements like, "Technology stocks are severely overvalued, sell."

The equity markets decouple. Dow finishes down 4.0%, 11251. NASDAQ gains 4.2%, 4236 (new record).

First Call (keeper of earnings data) estimated profit growth for the 4th quarter of 1999 at 20%. I add, however, "Profit gains were often the result of the strong performance in the company's own investment portfolio."

30-year Treasury hit 6.75% during the week. Bond traders were spooked by the surge in crude oil as inventories fell rapidly.

Margin debt up 25% in just the past two months.

Median household net worth was $71,600 in 1998 (latest reporting period) vs. $60,000 in 1995. Median value of stock- holdings rose to $25,000 in '98 from $15,400 in '95.

Apple Computer's board awarded Chairman Steve Jobs with a $40 million corporate jet.

1/29/00 - President Clinton gives his "How Great Thou Are" State of the Union speech.

Owners of theGlobe.com, aged 25 and 26, are forced to step down. Shares have fallen from $90 to $8 with no apparent business model.

The Dow fell 513 points to 10738. NASDAQ fell 8.2% to 3886, its worst week since August '98.

Sanford C. Bernstein analyst Steve Galbraith found that of the 50 NASDAQ stocks with the highest returns in '99, only 15 made money. The average turnover in this group was 600% (bought and sold 6 times over the course of the year). Turnover on the whole NYSE was 79%.

Me: "So yes, just more evidence that much of last year's NASDAQ action was of a casino nature. And in a casino, the house always wins."

Fourth quarter '99 GDP rose 5.8%. Consumer confidence remains at an all-time high. February will mark the longest boom in our nation's history, 107 months of uninterrupted growth.

The yield curve "inverted" (short maturities with higher yields than longer ones). The 2-year yielded 6.54% while the 30-year stood at 6.44%.

Qualcomm (split-adjusted) traded at $200 late December. Now it's at $110. Yahoo! (pre-split) fell to $313 from $500. Amazon.com was 50% off its high.

Alan Greenspan, in re-nomination hearing, said he was very worried about the level of margin debt.

The euro fell below $1 for the first time since it was launched in '99 at $1.16.

China admitted it was launching a massive corruption investigation involving a $10 billion smuggling operation.

Al Gore trails George W. Bush by only 47-44, nationwide, compared to 50-39 in December.

Oil is back down to $27.22

2/5/00 - The NASDAQ registers its best point gain in history after dropping 8% the week before, up 9.2% to 4244. The index has already had two 10% corrections in 5 weeks and keeps bouncing back. Amazon.com was up 30% despite reporting a loss of $323 million in the fourth quarter.

Dow sits at 10963.

The Federal Reserve hiked interest rates 25 basis points on 2/2. "The risks are weighted mainly toward conditions that may generate heightened inflation pressures in the foreseeable future."

Economic #'s: 30-year low in the unemployment rate, increased construction spending, personal income rising (but personal spending rising more).

30-year Treasury collapsed from 6.75% to around 6.00%, before finishing the week at 6.27%. Stupendous volatility.

Treasury Secretary Summers announced a huge buyback of longer Treasury securities.

GDP rose 36.6% in the 90s vs. 52.8% in the 60s.

John McCain captured the New Hampshire primary, 49-31, over Bush. Bill Bradley lost to Gore, 53-47.

Gold rallied from $283 to $318 on the announcement that a major producer was pulling their hedging program.

2/12/00 - Treasury Secretary Summers confused the bond market when he said that he "expected the Treasury to continue to use the entirety of the yield curve" in its decisions regarding the reduction of our federal debt, as well as future debt issuance and which maturities to bring to market. This was taken to be a total contradiction of previous pronouncements. The yield curve was now severely inverted.

2-yr. 6.63% 5-yr. 6.72% 10-yr. 6.62% 30-yr. 6.29%

The Dow Jones fell 538 to 10425 (a "correction" from its high), while the NASDAQ rose to 4395.

"We still have a market priced for perfection, with leading issues like Cisco trading at price / earnings multiples of 140, or higher.
When the slowdown finally materializes, earnings projections will head south." [Cisco's market cap hit $450 billion and analysts spoke of it becoming the market's first $1 trillion corporation.]

Microsoft fell $6 in one day as one PC expert said users would have problems with the new Windows 2000 software.

Oil climbed back to $29.35 on reports that inventories were falling further.

2/19/00 - Alan Greenspan's Humphrey-Hawkins testimony:

There is "little evidence" the economy is slowing and, in spite of the continued tame inflation numbers, "the profoundly beneficial forces driving the American economy to competitive excellence are also engendering a set of imbalances that, unless contained, threaten our continuing prosperity."

And… "(The Fed) will stay alert for signs that real interest rates have not yet risen enough to bring the growth of demand into line with that of potential supply." In other words, our boy is trying awful hard to prick the bubble.

The Dow fell to 10219, 13% from its all-time high. NASDAQ sat at 4411.

Malaysian Prime Minister Mahathir said he was "frightened" by the growing power of global corporations, some of which "are more powerful than mid-sized countries."

Rudy / Hillary are even.

In "The Simpsons," Maude Flanders dies. She was eulogized as one who "didn't grab our attention with catch phrases."

Charles Schulz died.

Linus: After you've died, do you get to come back? Charlie Brown: If they stamp your hand.

2/26/00 - The Dow loses 3.5% and now is at 9862, off 14.2% for the year, while NASDAQ rose 4.1%, 4590, up 12.8% year-to-date; a historic disparity.

Since the Fed started raising rates 6/30/99 the Dow Jones is down 10%. NASDAQ is up 71%. Greenspan has not been successful in pricking the bubble.

In 1973, the median price /earnings ratio on the Top 20% in the S&P 500 was 33.9, while the median on the rest of the index was 12.3. Today, the median p/e for the Top 20 is 70.8, with the other 400 issues at 14.7.

[I elaborated as follows.]

"Now since the historical average p/e is 14, that means that the bulk of stocks are not necessarily grossly overvalued (nor can you yet say they are significantly undervalued). But the leadership is in the stratosphere and I keep remarking to my market buddies, when the hell is this going to crack?

"As many analysts have pointed out, the link between the old and new economies could be as follows: If the economy ever slows (and Friday's revised, emerging market-like 4th quarter GDP of 6.9% certainly isn't pointing to an imminent slowdown) then capital spending amongst the old economy issues will slow and, eventually, that impacts the new economy earnings, i.e., how then would you justify a p/e of 70 with declining, not rising, earnings?"

"…Well, I still say, as for the NASDAQ, CRASH!!"

"And it was an interesting week for Alan Greenspan watchers. Boy, some big Wall Street names are abandoning him in droves. 4 weeks ago, Greenspan told us the gains in productivity that we have witnessed were real and a positive; then this week he said that this productivity was a bad thing, specifically because it creates a situation where demand outruns supply. But, more importantly, he continued to make it abundantly clear that the Federal Reserve would keep on raising interest rates."

Bush won the South Carolina primary, McCain won Michigan and Arizona. But the next series of primaries didn't include crossover voting.

A one-bedroom "cottage," listed at $495,000 in Santa Clara, sold for $750,000.

3/4/00 - China issued harsh warnings to Taiwan, "Our way or the highway."

"Silly me. I keep forgetting that the NASDAQ has to hit 5000, nay, 10000, before it crashes."

Palm Inc. IPO, priced at $38, trades as high as $165 on first day of trading, Thursday, and finished the week at $81.

The Dow Jones recovered to 10367. NASDAQ rose another 7% to 4914.

"Investors just keep pouring money into technology mutual funds and the portfolio managers can only go after so many issues."

Auto and retail sales surged, consumer confidence slipped just slightly.

The February employment report showed just 43,000 new jobs created.

Bush wins Virginia and Washington.

Oil, $31.45

3/11/00 - On Friday, the lead column in the Wall Street Journal blared, "Conservative Investors Finally Are Saying: Maybe Tech Isn't A Fad."

The NASDAQ peaks that same day at 5048. Dow falls to 9928.

Stock in Procter & Gamble fell 39% on dire earnings news. But P&G had been trading at a p/e of 34 when its shares traded at $87 on Monday; this for a company that, in a good year, would grow around 10-12%. Well, now it's at $53.

I'm conflicted as to the battle between "Old" vs. "New."

"And don't you forget that what happened to P&G (and before it, Raytheon, Xerox, and others) can just as easily happen to Cisco or JDS Uniphase. It's just a matter of time."

75% of the stocks in the S&P 500 are down 20% from their recent highs.

The Fed's "beige book," a survey of economic activity across the country, showed that there was still little inflation, but wage pressures were emerging.

Nymex crude oil hit $34 (the highest since 11/90) before finishing the week at $31.75. Iran and Saudi Arabia, OPEC's two largest producers, said they'd raise production quotas.

With NASDAQ hitting new highs, Amazon.com is trading at $67 (40% off of its high), while eToys has fallen from $86 to $13.

John McCain announced he was "suspending" his campaign. Some Republicans feared he was going to launch a third party bid. Bush had trounced McCain on Super Tuesday. Bill Bradley was slaughtered by Gore.

Next week, the story of the Great Tech Bubble continues.

Brian Trumbore