Nasdaq 5000, Part II
Brian Trumbore
President/Editor, StocksandNews.com

I had the foresight to save some newspapers and journals from the bubble era so this week I thought I'd take a further look at the background behind the Nasdaq's surge to 5048 on March 10, 2000. First some numbers.

12/31/99

Nasdaq?4069?+86% in '99
Dow Jones?11497
S&P 500?1469
Russell 2000?504

S&P P/E?33.42 (trailing 12 months)

3/31/00

Nasdaq?4572
Dow Jones?10921
S&P 500?1498
Russell 2000?539

S&P P/E?31.05 (trailing 12 months)

Nasdaq was up a staggering 49% from 10/15/99-12/31/99. [By comparison, the S&P 500 surged 18% over the same period, certainly not too shabby either.]

Christmas week, 1999, saw shares in Qualcomm soar $59 ? to $176 after a PaineWebber analyst issued a report with a target price of $250 (split adjusted).

For 1999, the S&P tech sector was up 75%, following 1998's 72% advance. Technology, a whopping 30% of the S&P at year end '99, was responsible for 90% of the overall S&P 500 gain that year of 21% (total return).

[Source: Barron's 1/3/00]

Here's another good overview, including the sentiment from that era; excerpts from E.S. Browning's column in the Wall Street Journal, 1/3/00.

"To fans, the tech-stock gains were yet more evidence of a new era of technological innovation that is rewriting the rules of both the economy and the stock market. To the biggest tech bulls, the new era is symbolized by the Internet and is still in its infancy. To skeptics, the remarkable gains are another frightening indication the great bull market of the 1990s has turned into a mania and could end badly.

"Whoever is right, even bullish prognosticators are warning clients to expect the unexpected.

" 'Simply put, our forecast for 2000 is that the unprecedented continues to happen,' says Lehman Brothers investment strategist Jeffrey Applegate, lately one of the more successful market forecasters, in a report to clients. Even the bullish Mr. Applegate, who forecasts a strong year to come, underestimated the market's strength when he made his forecast a year ago.

"Whether it was a mania or a new era, the technology bonanza of 1999 was a narrow phenomenon. With investment money flooding madly into technology, nontechnology stocks suffered, some mightily. Many actually showed declines for the year. While communications-equipment maker Qualcomm leapt more than 2,000%, established, blue-chip names such as soft-drink titan Coca-Cola and drug giant Merck declined in value.

"Indeed, with the Federal Reserve steadily raising interest rates from June 30 onward, and threatening to continue this year, most stocks declined from summer onward. But tech-stock investors laughed in the face of Fed Chairman Alan Greenspan. Tech lovers are betting the world's recovering economies will load up on so many high-tech and communications toys that even high interest rates won't hold back tech earnings.

"The revolution in information technology is changing the world in ways similar to what railroads and steel did in the past, says J. Thomas Madden, chief investment officer at Federated Investors in Pittsburgh. Citing business uses of the Internet, as well as heavy investment in new technologies, he says: 'I think we are undergoing a powerful shift in the way the world does business.' Despite technology stocks' huge gains last year, he believes investors should keep a strong dose of technology in their portfolios?.

"Bears are pointing with increasing frequency to Japan's experience in the 1980s. The Japanese market, they note, belied critics for so long that many finally concluded that Japan's economy was in a new era that justified unprecedented stock gains. It was when the doubters were fully discredited that the Japanese market finally crumbled?.

"Bearish Barton Biggs of Morgan Stanley Dean Witter points out that technology and telecommunications stocks have come to dominate stock markets around the world. 'From these disproportionate weights, I conclude that when the tech and telecom bubbles burst, all the world's markets will come down together,' he writes.

"But he adds, 'Although there are many signs that the craziness is at manic proportions, I don't see the event yet that is going to crack it.' He quotes a Japanese stock market saying: 'Only fools are dancing, but the bigger fools are watching.'"

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Finally, I thought you'd like to see some representative share prices, including both hot Nasdaq issues of the era as well as more standard NYSE fare.

I am including two periods of time. The first set of numbers represents the 52-week range and 12/31/99 close. The second set represents the 52-week range and 3/31/00 close. 's' denotes a stock split in the prior 52 weeks. 'n' is a new issue within the past 52 weeks.

Don't get confused with the splits. Remember, some stocks split 2, 3, or 4 to 1 and then immediately soared right back to the old level?rationality be damned. Others would split after the period I'm covering, thus don't get hung up on the numbers vs. what you perceive to be the all-time marks. For example, Cisco's all- time high is $82, set on 3/27/00. [Adjusted for splits.] But Intel didn't hit its high until 8/28/00, $76, again, you'll see this was split-adjusted.

?????12/31/99???..3/31/00

Amazon?(112-41)s?76?..(112-41)s?67
AOL?(95-32)s?76?..(95-38)?67
Ariba?(211-30)n?177?..(366-30)s/n?209
Broadcom?(289-46)s?272?..(253-29)s?242
Citigroup?(58-32)s?56?..(62-40)s?59
Cisco?(107-44)s?107?..(82-24)s?77
CMGI?(288-26)s?277?..(163-33)s?113
Commerce One?(331-8)s/n?196?..(331-8)s/n?149
Doubleclick?(255-22)s?253?..(135-30)?93
eBay?(234-55)s?125?..(255-70)?176
EMC?(111-41)s?109?..(145-46)s?125
eToys?(86-24)n?26?..(86-8)?8
Exxon Mobil?(87-64)?81?(87-69)?77
General Electric?(159-94)?155?..(164-99)?155
Global Crossing?(64-18)s?50?..(64-20)?40
Intel?(89-50)s?82?..(145-50)s?131
JDS Uniphase?(177-14)?161?..(153-12)s?120
Juniper Networks?(384-90)n?340?..(312-30)s?263
Lucent?(84-47)s?75?..(84-49)s?60
MCI Worldcom?(64-44)s?53?..(64-40)s?45
Merck?(87-60)s?67?..(85-52)?62
Microsoft?(119-68)s?117?..(119-75)?106
Motorola?(149-60)?147?..(184-73)?142
Nortel?(110-24)s?101?..(144-31)s?125
Oracle?(113-21)s?112?..(90-10)?78
Pfizer?(50-31)s?32?..(50-30)s?36
Qualcomm?(185-6)?176?..(200-15)s?149
Sun Micro?(83-21)s?77?..(106-24)s?93
Wal-Mart?(70-38)s?69?..(70-38)s?55
Yahoo?(448-110)s?432?..(250-55)s?171

Notes:

--You may see a 's' for a split during one period and not another, as in the case of AOL. That's because it was more than 52 weeks since the split, thus no 's' on the second series.

--Commerce One was as wild as they came. The week of 12/27/99, the stock rose $53 following a stock split. Then the week of 3/27/00, it fell $74 over the course of the five days. It was like that almost every week it seemed.

--The action in eBay the week of 3/27/00 was also symptomatic of the times. The stock hit the $255 level you see above during the week, yet finished up at $176.

--eToys was an example of a stock that soared on the IPO, only to crash and burn in fairly short order. Yes, the 3/31/00, 52-week range and 3/31 price are correct.

--Yahoo's 52-week range for 3/31/00 is adjusted for the fact the shares were at $500 at one point before a split.

--And remember, some of these shares may have split at least one time after the periods I'm highlighting, as in the case of G.E.

Source: For all the above data, Barron's 1/3/00 and 4/3/00.

Brian Trumbore

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