The Bubble, Part V
Brian Trumbore
President/Editor, StocksandNews.com

We wrap up our latest look at the Bubble. By November and December of 2000, all eyes were on the election debacle. Comments are taken directly from my "Week in Review" columns and quotes, unless otherwise noted, are mine. [The date listed is that of the column.]

11/11/00 - Dow Jones 10602?Nasdaq 3029

Presidential election is undecided after Florida fiasco. Floridians feel "disenfranchised."

I bemoaned a lack of statesmen. "The real crises we face in the future will be potentially cataclysmic."

Economy was slowing, earnings decelerating, and "investor / analyst expectations for future corporate profit growth are still too high."

Nasdaq plunged 12.2%. Now 40% from March 10 high of 5048. 5 of past 6 weeks Nasdaq was up or down 5%. Cisco and Dell disappointed with earnings reports and forecasts.

I quoted a diplomat in Southeast Asia. "The growth of radical Islamic movements?is very alarming. It's already a major destabilizing force and it has the potential to become much worse?(The Fundamentalists are ready to do battle against) evil Western influences."

Pets.com folded.

Fox premiered a new program, "The Street," which bombed.

11/18/00 - Dow Jones 10629?Nasdaq 3027

America continued to await a winner in the presidential election.

OPEC said no more production increases and contemplated cutting it come spring.

Pets.com spokesman: "We're in discussions with a number of people for some of the bigger assets, like the sock puppet."

Abby Cohen said stocks were as attractive as they've been all year.

The Federal Reserve left interest rates unchanged, while warning that risks were tilted toward accelerating inflation.

Ed Hyman of ISI and PIMCO's Bill Gross call for "hard landing."

New Jersey's Senator-Elect Jon Corzine spent $43.30 per vote.

Oil, $35.45. Gold $266

11/25/00 - Dow Jones 10470?Nasdaq 2904

Election still unresolved.

Despite a big Friday after Thanksgiving rally, the major averages still lost ground, with Nasdaq losing 9% in the first three days of the week.

Federal Reserve Bank of Philadelphia survey of economists calls for GDP growth of 3.3% in 2001. 4th quarter earnings outlook looking dim.

Coast Guard Commander Stephen Flynn:

"Osama bin Laden could have a front company in Karachi, Pakistan, load a biological agent into a container ultimately destined for Newark, New Jersey, with virtually no risk that it would be intercepted. He could use a Pakistani exporter with an established record of trade in the U.S. The container could then be sent via Singapore or Hong Kong to mingle with the half a million containers that are handled by each of these ports every month. It could arrive in the United States via Long Beach or Los Angeles and be loaded directly onto a railcar or truck for the transcontinental trip." [And he went on and on. The point being, this was long before 9/11. Good people were working on the threat, that's for sure.]

EToys is at $1.75, off its 52-week high of $70. E-Stamps trades for 34 cents, the cost of a first-class stamp come January 2001.

Investor sentiment from 'Investors Intelligence' survey:
Bulls - 55%
Bears - 28.5%?Newsletter writers wrong as usual.

12/2/00 - Dow Jones 10373?Nasdaq 2645

Election still undecided, as America is awaiting rulings from both Florida and the U.S. Supreme Court.

"What we have witnessed in Nasdaq is a CRASH!"

"Some of us have questioned whether Alan Greenspan is behind the curve. The evidence of a sliding economy is mounting by the day."

Gateway announced a huge decline in sales.

Year-to-date job losses in Internet sector - 31,000.

G.E. selected Jeffrey Immelt to succeed Jack Welch at the end of 2001.

Only 46% of those who downloaded Stephen King's Net book paid up. King was a dirtball, too, for canceling the book in mid- stream.

12/9/00 - Dow Jones 10712?Nasdaq 2917

Election still unresolved. It's getting ugly.

Greenspan made the following statement:

"In an economy that already has lost some momentum, one must remain alert to the possibility that greater caution and weakening asset values in financial markets could signal or precipitate an excessive softening in household and business spending."

Greenspan appeared to leave little doubt that the Federal Reserve was prepared to lower interest rates if the economic situation worsened much further. Tuesday, the Nasdaq recorded its biggest one-day gain in history, 274 points or 10.5%. Dow gained 338 points. [For the week, Nasdaq gained 10.3%.]

"On the banking front, Greenspan himself warned of a credit crunch if bankers didn't loosen up a bit. He said you don't want to 'cut off credit to borrowers with credible prospects.'"

University of Michigan index showed a drop in confidence in November not seen since the last recession in '90-'91.

Profit warnings from Intel, Motorola, Apple and Bank of America. Intel spoke of cancellations of orders worldwide.

Merrill strategist Richard Bernstein warned that there's "tremendous overcapacity in the tech sector."

G.E.'s Robert Nardelli and James McNerney named CEO's of Home Depot and 3M, respectively, after losing out to Immelt.

Dot-coms have cut back drastically on Super Bowl ad buys, taking just 10% of the slots vs. 50% the prior year.

8 of the top 9 all-time percentage gains on the Nasdaq have occurred this year, yet the index is still off 25% year-to-date.

Asbestos heating up as issue, taking down Crown Cork and Seal, W.R. Grace, Owens-Illinois and Armstrong World.

I call for a Ronco Votomatic.

12/16/00 - Dow Jones 10434?Nasdaq 2654

Election finally resolved.

"I hope you kept your powder dry, because for the umpteenth time we had been told by many of Wall Street's experts that we had seen the lows?

"Sentiment is sliding (except, seemingly, among some financial markets strategists) and since the consumer represents two-thirds of the economy, I'd say that's rather important?

"The evidence is piling up that this isn't exactly your father's slowdown?Economist Stephen Roach of Morgan Stanley commented on the steep deceleration in all activity.

"(We are witnessing) a recession-style compression in the growth rate. It's coming with great speed...(and this is) destabilizing in influencing business decisions with respect to capital spending, and could even be unsettling to consumer expectations."

Ed Hyman raised his odds of a full-blown recession to 50%.

Bad news on earnings front comes from every angle. Microsoft cited global softening in issuing its first profit warning since Bill Clinton was hitting on Gennifer Flowers.

Abby Cohen called for S&P 500 to rise to 1650 over the next 12 months.

50% of country said "No," the country won't unite following the election decision.

A-Rod signs $250 million contract to play for Texas Rangers. Separately, "A (baseball) strike in 2002 looks like a certainty right now."

12/23/00 - Dow Jones 10635?Nasdaq 2516

At one point, Nasdaq was down 23% in a 7-day stretch ending Wednesday, before another stupendous rally.

Greenspan held line on rates, when everyone expected a cut (it would come 1/3/01).

David Tice, who earlier in the year called for Nasdaq to crash to 2500, now called for Nasdaq 1000 in 2001.

Consensus of 38 strategists calls for Dow 12015 by yearend 2001, an S&P 500 level of 1560 and 3580 on Nasdaq. Economists forecast growth of 3.1% in 2001. [The first three quarters ended up being negative.]

12/30/00 - Dow Jones 10788?Nasdaq 2470.

"The economy continues to slow, witness the ongoing decline in the 'leading indicators,' the collapse of Bradlees and Montgomery Ward within two days (affecting 40,000 workers), the bankruptcy of steel giant LTV, job cuts at Union Pacific, mediocre (at best) holiday sales, and indications of a broad-based slowdown in corporate spending on all manner of technology products?just for starters?

"Which means that we're not close to a bottom in the economy. Actually, no one really has a clue where we're headed, but they'll say they do, spouting statements like 'Once the Fed starts lowering interest rates again, we're off to the races.' Salve the wounds? Limit any further damage? Probably. Off to the races? I don't think so, and that's just my educated opinion." [I was mostly correct in this reasoning.]

2-year finished 2000 at 5.09%
10-year?5.11%

For the year?

Dow Jones -6.2%
S&P 500 -10.1% (-9.0% total return)
Nasdaq -39.3%

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Next week I will take a look at some historic numbers.

Brian Trumbore




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