As we pick up our story, the NASDAQ had hit its all-time high of 5048 on March 10, 2000, already up a whopping 24% for the year. The Dow Jones, on the other hand, stood at 9928, off 14%.

Again, all of the following is gleaned from my "Week in Review" pieces. The format is designed to give you a quick sense of the investment scene at the time. Any quotes are from yours truly, unless otherwise indicated. The NASDAQ is about to run into trouble.

3/18/00 - Strong retail sales report for February coupled with low inflation numbers.

Biotech bubble bursts when U.S. and Britain agree to openly share information on the human genome project. Many of the issues plunge 50% from highs established just the previous week. The market is worried that the profit incentive has been wiped away.

Bonds staged a strong rally, with the 30-year trading below 6% for the first time in 6 months.

Margin debt is exploding, up 87% year-over-year.

An analyst gets on CNBC's "Squawk Box" program touting a stock, Aspeon, which proceeds to go from $22 to $35 that morning, only to fall back to $21 by the end of the same day.

Oil, $30.91.

Markets go in different directions. Dow Jones advances 6.7%. NASDAQ declines 5%.

3/25/00 - The Dow Jones finishes up another 4.9%, making its two-week gain almost 1200 points (11118). The NASDAQ closes at 4964.

To give you a sense of the volatility in the biotech sector, 52-week high / low and the closing price for the week:
Abgenix ($413 - $12 - $150)
Protein Design Labs ($338 - $13 - $72)

On March 22, Cisco had a market cap of $500 billion; Intel, $480 billion. Cisco's price / earnings multiple is 200. Intel's 68.

Business Week had a cover story on market hype.

Federal Reserve raised interest rates 25 basis points on 3/21 (the 5th such increase since 6/30/99). The market rallied right in the face of Greenspan.

I mentioned Fed may raise 50 bps on May 16.

Shape of Treasury yield curve:
1-yr. 6.28% 2-yr. 6.62% 10-yr. 6.19% 30-yr. 5.99%

Mutual fund flows at record levels.

4/1/00 - OPEC agreed to raise production 1.5 million barrels and announced a new price band of $22 - $28 as being desirable.

Abby Cohen slightly reduced her exposure to stocks in her model portfolios, saying we need to consider the "question of valuation."

Hedge-fund maven Julian Robertson, in a letter to shareholders announcing his departure:

"There is no point in subjecting our investors to risk in a market which I frankly do not understand."

NASDAQ suffers its worst point loss in history, 390, to close at 4572. The week contained the 4th, 10% decline of the year (already). Dow closed at 10922.

Valuations on tech issues are sky-high worldwide.

Oil down to $26.80.

4/8/00 - Dow finishes week at 11111 (+1.7%). NASDAQ, 4446 (-2.8%). But that doesn't even begin to tell the story.

On Monday, 4/3, the Dow finished up 2.8%, while the NASDAQ declined 7.6%, the largest divergence between the two since the day after Black Monday in 1987.

Tuesday, the Dow hit 10717. But the NASDAQ touched 3649, off 13.6% for the day at its worst point, or a 20% two-day decline. Then the NASDAQ reversed course and soared 800 points the rest of the week (22%).

"We are still grossly overvalued!" Cisco at 170 times trailing earnings. Yahoo! with a p/e of 400.

Alan Greenspan said in a speech that he wasn't trying to control stock prices.

C.R.A.P…."Companies without revenues and profits."

Hillary is up 49-41 on Rudy.

4/15/00 - For the period 3/10-4/14 (since the NASDAQ top), the Dow Jones had gained 4% (now at 10305), while the NASDAQ lost 34% (3320).

The NASDAQ fell 25% for the week, the worst performance for any major index in U.S. financial history. [In the span of two weeks; down 20%, up 22%, down 25%.]

Discussed current analyst recommendations:

Cisco - 45 rate it a "Buy," 1 "Hold." Stock has fallen to $55 from $82.

CMGI (Internet holding company) - 11 "Buy," 1 "Hold." Shares have fallen from $163 to $50. [About $7 today.]

Yahoo! - 25 "Buy," 4 "Hold." $250 to $111. [Around $33 today.]

Abby Cohen appeared on Wall Street Week and said, "Nothing has changed."

Fed Governor Lawrence Meyer. "The threat of overheating…is much greater today than previously."

Markets had to digest a horrible report on consumer prices for March.

4/22/00 - "The tech wreck will have a much more immediate impact on consumer spending than the interest rate hike the Federal Reserve has given us." --Economist Ed Yardeni.

"The impact on the real economy will be faster than people expect and concentrated in technology." -- Economist Bob Barbera.

Monday and Tuesday, the NASDAQ registered the two best point gains in history on the way to its best week ever, +10%, to 3643. The Dow rose 5.2% to 10844.

Little guy buying the dip.

Author Ron Chernow. "Our most prestigious investment houses have invented bogus mathematical formulas to justify stratospheric stock prices…feeding the inexhaustible appetite of small investors."

Earnings are poring in for the first quarter and the average S&P 500 company will see gains in excess of 23%. But as for the share prices themselves, meeting or exceeding expectations no longer seems to result in a huge pop.

"Greenspan is going to slow this economy come hell or high water…and it's going to be tougher and tougher to meet already established rosy forecasts for 2001."

Investment legend Leon Cooperman:
--Get off margin
--Know what you own.
--Cut your expectations for future returns.

Tokyo's Nikkei Index fell 11% for the week.

First quarter was the warmest in the U.S. in 106 years of record keeping.

4/29/00 - "There is an almost surreal quality to the present boom. What we get (in the stock market, most prominently) is a tug of war between wild optimism and instinctive caution."
--Economist Robert Samuelson

NASDAQ up 6% to 3860; Dow falls to 10733. The NASDAQ had fallen 300 points on Monday morning.

Trading volume is the lightest of the year.

GDP for Q1 rose 5.4%. The Employment Cost Index rises a worrisome 1.4%, the strongest advance in 10 years.

Federal Reserve next meets on May 16 and may raise rates 50 basis points because of these strong numbers.

I wondered aloud if we really needed to keep upgrading our PCs. "I have trouble with the feeling that we will always be spending increasing amounts in every tech product imaginable (particularly on the corporate level)."

Federal government is seeking to separate Microsoft into two companies.

AT&T workers are taking out second mortgages to purchase shares in AT&T Wireless.

Italy swears in 58th post-World War II government.

Rudy Giuliani announces he has prostate cancer…he may drop out of Senate race.

[The next two weeks were extremely slow in the way of market news.]

5/6/00 - "In the past year, the ability to monetize shareholder ignorance has never been greater." --Warren Buffett

"The most notable contribution of computers to the recent growth in productivity has been in the manufacturing of more computers." -- Jim Grant

Dow, 10577. NASDAQ, 3817.

5/13/00 - By Wednesday, 5/10, the NASDAQ had plunged 11% in 3 days, and closed down 7.5% for the week (3529). Dow at 10609. But trading volume is very light.

Cisco registered its 12th consecutive quarter of beating analyst estimates by one penny (but this time Cisco fell, closing the week at $60).

"You better report news far better than expected or you're toast."

Rudy Giuliani admits marital problems.

Oil back to $29.62.

5/20/00 - "My, it's mighty quiet on Wall Street these days, volume is drying up. No conviction. And the market keeps taking one step forward and two backwards. It's a deadly grind."

The Federal Reserve raised rates 50 basis points on 5/16, releasing this statement:

"Increases in demand have remained in excess of potential supply, exerting continued pressure on resources…The disparity in the growth of demand and potential supply (may) continue which could foster inflationary imbalances."

"Overconfident individuals, companies and foundations are heavily invested in this market. Some retirees (who) have sunk all of their savings into stocks…risk losing not only their investments but their homes." -"Irrational Exuberance" author Robert Schiller in an op-ed piece.

NASDAQ rises on day the Fed raises rates, just as it has previous 5 times since 6/30/99. NASDAQ finishes week at 3390. Dow 10626.

Washington Post editorial: "The uncomfortable truth of Wall Street is that the information on which it runs is suspect."

Tokyo's Nikkei closed the week at 16858, the same level as June
1992.

European economies performing well.

Rudy Giuliani quits senate race.

5/27/00 - "This is the kind of party where the guests, if deprived of the host's refreshment, whip out their pocket flasks and gather round the piano to sing another round of, 'Brother, can you spare a dime?' They are rude and undisciplined, and they won't go home." -- Thomas Donlan / Barron's; referring to the last
NASDAQ bulls.

The current small signs of a possible economic slowdown could begin to cascade in an ever-increasing torrent of bad news.

As for the Federal Reserve, the big question of the day is suddenly, "Did they overdo it?" by raising interest rates as much as they have.

NASDAQ 3205, down 21% year-to-date; off 37% from the 3/10 high. Dow at 10299.

Qualcomm is at $66. Down from $200 five months earlier.

The House voted to permanently normalize trade relations with China.

Israel pulled out of Lebanon.

Total profit per episode for "Who Wants to be a Millionaire?" is in excess of $4 million.

6/3/00 - Economic numbers exhibited signs of a slowdown across-the-board; manufacturing, housing, retail sales.

NASDAQ records best week ever, up 19% in just 4 days, to 3813. The Russell 2000 also had its best weekly performance ever, up 12%. Dow adds 5% to 10794.

Return to Nifty 50-type environment. Cisco back to $64, with a 100 p/e based on 2001 earnings estimates.

"The key is earnings and no one knows where this economy is taking us, except that the direction appears to be down…not good for already inflated forecasts."

CNBC has Jose Canseco on in the morning. Later in the day, one of the reporters goes, "China.com is up. You heard Jose
Canseco talk about it!" That pretty much sums up the atmosphere during the great NASDAQ bubble.

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Of course the NASDAQ was to have more wicked gyrations over the rest of 2000. I'll wait awhile to allow the passage of time before continuing with the story.

Next week we return to more normal pieces.

Brian Trumbore