| MARKET ROUNDUP | |
| Dow | -85.26 to 18,203.37 |
| S&P 500 | -9.61 to 2,107.78 |
| Nasdaq | -28.20 to 4,979.90 |
| 10-YR Yield | +0.038 to 2.122% |
| Gold | +$5.80 to $1,202.40 |
| Crude Oil | +$0.75 to $50.34 |
As I started banging out this column, CNBC decided to run TV clips from early 2000. Those snippets chronicled the dramatic rise … and then the epic fall … of tech stocks long since dead and gone, as well as those still alive and kicking today.
The hairdos look a lot different. The anchors look a lot younger. But those are hardly the biggest differences between CNBC’s coverage then and CNBC’s coverage now (or the print and online stories back then versus the present day). The biggest difference to me? Despite the strong and steady market gains over the last couple of years …
Stock mania is completely MIA!
Think back to just before the turn of the millennium. There was a whole different attitude toward stocks, and a whole different American frame of mind!
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| Nasdaq celebrated 5,000 again but without the insanity that hit markets last time. |
Dot-bomb stocks like Pets.com were flying on a wing and a prayer. Online brokerage commercials featured executive assistants driving Ferraris. Analysts were slapping $1,000 price targets on stocks like Qualcomm (QCOM, Weiss Ratings: B), and they responded by surging tens or even hundreds of dollars in a single day! Party chatter was all about how much money everyone was making in tech stocks and little else.
None of that is going on today. If anything, average investors STILL aren’t going hog-wild pouring money into stocks or bragging about their gains at the country club. They’re dog-piling into bonds – even at the lowest yields and highest prices in history!
A few facts to consider: Stocks have been on fire since 2009. But investors didn’t even start putting net new cash into stock mutual funds on an annual basis until 2013. Then after putting $160 billion into the stock market that year, they invested just $25.6 billion in 2014.
That compares with a much, much larger $316 billion in inflows in the year 2000! ETF data also shows that bond ETF inflows have more than quintupled to $300 billion since 2008, and that bond ETFs are attracting a higher percentage worth of inflows than stocks … despite the fact stocks are doing well.
| “I’d be much more worried about stocks if I saw the same kind of insanity and ridiculousness I saw in dot-coms in the late 1990s |
Does that mean it’s all blue skies ahead? No, of course not! There are challenges facing equities, from geopolitical and debt problems in Europe to unrest in the Middle East to earnings pressure stemming from the heretofore strong dollar.
But I’d be much more worried about stocks if I saw the same kind of insanity and ridiculousness I saw in dot-coms in the late 1990s, or housing in the mid-2000s. That mania is still MIA, and that could be one of the main reasons this rally has staying power!
So what do you think? How is today’s stock market environment different – or similar to – what we saw in 1999-2000? Do you have a different attitude toward investing in stocks now than you did then? Do you see signs of manic behavior that I’m missing? Or do you think the lack of that kind of craziness means stocks have further to go to the upside?
These are incredibly important questions, and the answers to them could determine whether 2015 is a successful year for all of our portfolios. So please do share your thoughts over at the Money and Markets website.
| Our Readers Speak |
In the meantime, a few of you already weighed in on the Nasdaq 5,000 milestone in the last 24 hours.
Reader Fred1 said: “I mentioned a couple of weeks ago that the Nasdaq appeared to be in an ending triangle and appeared ready for an upward thrust. And so it is now doing it. The bad thing … triangles in that position at a 4th wave are an ending formation of an upward trend. After this thrust….the entire upward recovery from March 2009 should come to an inglorious end.”
Reader Books also weighed in with a cautious message, saying: “Lost in all this hoopla is the fact that if you had all your money in techs in 2000 you would have waited 15 years to get it all back.”
Bottom line: Even on our feedback page, it doesn’t seem like investors are going nuts jumping on the tech bandwagon – and that’s a huge difference from how investors were behaving the last time we were at these levels.
Meanwhile, Reader Troy said the latest round of M&A does make sense from a strategic standpoint. His view:
“The NXP purchase of Freescale will prove beneficial to both companies. Freescale is a very good semiconductor company which was held back by the private equity investors who continued to own the majority of the company’s stock. These investors only cared about turning a profit on their mistimed purchase, not about investing to make Freescale competitive. With proper investment, Freescale will dramatically boost NXP’s future profits.”
Thanks for the input, Troy. Anything you (or anyone else) would like to add about the HP deal? Or the many deals we’re seeing in health care? Or the Nasdaq 5,000 move in general? Then don’t forget to hit up the website and comment when you have a chance.
| Other Developments of the Day |
The relationship between the U.S. and Israel is increasingly strained these days, and today’s speech before Congress by Israeli Prime Minister Benjamin Netanyahu isn’t helping things. Netanyahu accepted a speech invite from Congressional Republicans, something that has rubbed President Obama the wrong way. The two leaders disagree over how to prevent Iran from obtaining nuclear weapons, with Netanyahu favoring a much tougher negotiating line than Obama.
Any thoughts on these stories? Or other news items I might have missed? Then use the website to share them with your fellow investors.
Until next time,
Mike Larson
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
{ 28 comments }
Someone else ran NASDAQ 5000 through the Minneapolis FED’s inflation calculator. ‘Turns out that would equal 6960 in today’s dollars. There are many other reasons to think the markets have a ways to go before they peak out. PEs are nowhere near what they were in 2000, for example.
Costco is ditching AMEX for Capital One, not Citibank credit card.
No Question from a macro economic, technical, cyclical, demographic stanpoint we are in a classic topping scenario for the capital markets…
ls it then foreign investors fleeing their own non dollar markets? Same for NYC crazed real estate values
There is no doubt that Boehner should have advised the other party that he was inviting Netanyahu to speak before Congress. That being said, however, how many times has Obama done things on his own with absolutely no regard to Congress as required either by the Constitution or accepted protocol? Given the grave importance of any negotiations with Iran, Obama should be briefing top senators and congressmen of his actions on a weekly basis. Instead….as usual….Congress has been kept totally out of the loop. I would not doubt that Obama tries to sign a treaty with Iran while indicating to the Iranians that he does not need the approval of our senators. And why should he not? Nothing else in our constitution seems to matter to him and no one has stopped his illegal actions to date.
I get the feeling we are loosing control of our country to bureaucrats. Is it, that most of us don’t care the way we use to? Now they just seem to shake a few hands and kiss a few babies every cycle and then just do what they want. Do you trust this?
I am predicting around 18,300 on the Dow. In fact, I told your firm about it. But they never called me back.
Mike I remember you when you worked on the CBOT. Now you are a GURU.
So you can do what most people do at Costco. Write a check?
They will accept that.
Try it.
I know it is not cool.
But it works.
And short American Express.
ISRAEL CAN NOT AFFORD TO GO IT ALONE ON THIS ONE
Israeli Prime Minister Benjamin Netanyahu has always favored a military response to halt the expansion of nuclear programs in Iraq and now Iran. The difference today is Netanyahu is politically unwilling to unilaterally commit to a (preemptive) military strike and the risk of counter-strike ( push-back) of incalculable extremes.
Netanyahu needs us to cover his back and add credibility to his actions, which will universally be condemned in the U.N. should he attack Iran for ANY reason. Israel could not get former President George W. Bush to go along with it and neither can he gain President Obama’s support for a military option of any consequence. So, he has to just be patient until he is faced with a threat of imminent death situation and then use “deadly force”. It truly remains a last resort and one which so far, few Americans support our military involvement in at this juncture. Netanyahu’s Congressional Speech really changes nothing.
H Craig,
It’s so sad that you’re right. Nothing will change on the Hill until it’s too late.
The only reason the Nasdaq is flying so high along with the other indexes is because of all the free money the US Government is handing out to the banks to gamble with. I keep hearing about all the turnaround in the economy and how it is doing so much better, but in my neck of the desert there are multitudes of empty buildings and no businesses lining up to fill them. The only turnaround in the economy is fueled by more fraudulent and manipulated data (propaganda) spoon fed to the masses my the media. The stock market is nothing but a rigged game to enrich the oligarchs and has no connection to reality.
The primary reason we are not seeing the stock mania that we saw when nearing previous market tops is because the average investor is slowly becoming better educated. The internet provides a wealth of financial educational materials. Today instead of getting financial outlooks from brokers or perhaps the Wall Street Journal, investors have access to many quality free or low cost newsletters which tend to temper the hysteria.
I think you may have hit on something there, Troy. But watch out for those newsletters that play on peoples emotions. And if the small print says anything about them being paid, just ignore whatever they say.
If Israel’s last best hope are political hacks like John Boehner and Mitch McConnell they are in deep trouble. When you compare the stature of these men with so many outstanding Congressmen that have led our country over the years we should be ashamed of ourselves for letting things get this bad. The Social Welfare State begun under Woodrow Wilson has turned us into a second rate nation that is no longer feared by rogue states like Iran. The wisdom of Solomon is needed to solve the problems of the Middle East and we just don’t have it. Jim
Solomon in the White House? LMAO!!
It would be nice to know who is doing the investing in our stock market. USA individuals,corporate share buybacks,foreigners. The US has the best thing going right now.
but the strong dollar is hurting our local producers which in turn hurts employment.
If the government would have given every household $30,000. instead giving a trillion dollar bailout of the banks, people could have kept their homes, houses would have held their values banks wouldn’t have been stuck empty houses.
In the 1980’s and 1990’s, stocks rose for nearly 18 years. If this current bull runs for just half that long it will go for for about three more years, through 2017. I see no reason why this is not possible. It could go on for even longer, of course!
The 90’s saw a bubble in dotcoms by public speculators; now, we see a bubble in the whole market by the professionals. One of the best examples is Dr. Weiss. Yes, Dr. Weiss. For 40 years he was a conservative, prudent investment advisor; now, each new service proposes to turn thousands into millions. I pity Dr. Weiss’ turn for the worse; nevertheless, his behavior smacks of mania. Would his father have been so reckless?
There are a number of differences between now and the 90’s.
1. Retail investors seem to still be scarred by the 2008 crisis. In 1987, the stock market crash affected far fewer people than the 2008 crash, but even then, the stock market really didn’t take off until 1994, seven years later. We’re just at that point now relative to 2008.
2. Demographics have changed, which may explain the demand for bonds as boomers retire or their target date funds near their endpoint. Getting a coupon payout every month just seems more reliable than hoping for increasing returns in your stock portfolio.
3. In the 90’s, the goal was to launch a website and sell out to insatiable investors. That’s not so easy now.
4. Biotech seems far more bubbly now than back then. However, the promise is greater now with improving technology and extreme pricing.
I’m expecting another October like selloff when the Fed raises rates, but then another snapback as the bull market continues for a few more years, albeit at a tempered rate of increase.
It’s been stated that one would have had to wait 15 years to get one’s money back in tech stocks, as it took that long for the Nasdaq index to recover the 5000 level. However, what’s been overlooked is that an investment in QQQ, the Nasdaq 100 etf, has more than doubled (from a split-adjusted issue price of $50 in 1999 or so, to a closing price of $108 today). Since buying the QQQ was the only realistic way of getting a broad piece of the Nasdaq (at least via an etf), one would not have fared so badly over the past 15 years in tech stocks.
Hi Mike
Think money, power and control and ask.
Who’s got the money, who’s got the power and who’s got the control. Evidently some larger companies with high balance sheet cash surpluses aren’t quite sure which way to go. There are a few things that have changed since last time.
The entire market is a sham built on cheap financing, bogus earning reports and massive stock manipulations. Real companies earn their profits by sales, not stock manipulations and buy backs. No sales, no earnings, no new jobs. Not all that tough to figure out. Stir in a few trillion in vapor money and you get a vapor economy. No smoking allowed, a highly flammable situation financially and politically. In short, a fool’s market where each fool thinks he will be able to bail just before the crash.
The Dollar and future Dollar promises(bonds) are the bubble today.Seems like the U.S. has the best salesmen and we have convinced the world how great we are.Reality will come,eventually and then the bubble will burst.I expect our govt,given massive powers by citizens who worship govt,will attempt price controls and every other thing,to stop the crisis.There sure aren’t any countries,that are going to bail us out.
Of course, there are differences between the stock market of 1999 and today. There were many overvalued stocks that were pushed by brokers probably more than today.
I still invest in the stock and options market, but I do so with more research than back then. I try to look for good buy points and not overvalued issues.
We will continue to see ups and downs, but invest cautiously and keep a long term perspective and you should do fine.
Seems to me the big thing everybody is missing, the government and the ‘to big to fail banks’ have destroyed the middle-class. Wall street and the banks got bailed out by the tax-payer (including middle-class who had been encouraged to use their homes as piggy-banks), jobs were destroyed, u-6 unemployment went to upper teens, and illegals poured into the country. Unemployment stretched to 3 years, people lost edge on skills and less desirable to employers, businesses pared employees to reflect reduced traffic creating more out of work, and inflation hit food, fuel for heat and getting to work, and administration has wasted trillions to payback election debts.
The worker is struggling to keep their head above water, the government is bankrupt at all levels, taxes going up so businesses that exist have less to spend on the business after paying taxes plus obamacare fiasco. Yet wall street and government don’t understand, I understand gov. problem none have ever held a job, but wall street!
I am from India .there is no wild exuberance in all the stock markets everywhere in the world .The reason is simple -if for example i come to your house as there is a party going on and 3 times times i come to such a party enjoy a little and then get beaten up badly and sent home naked what do u think i will come the 4th time even if u are welcoming me from your door. “”twice bitten third time shy””.
secondly the false money printed all over the world has gone in different assets but a large part all over the world has gone into the property market but in the USA its gone in stocks and commodities and a part in properties . check out the prices of properties all over the world they have gone crazy (see esp. hongkong ,india its up 10 times in 10 years can u believe it and other countries) Peoples craziness has shifted from stocks to real estate all over the world (a top infosys management official has got a personal trust to invest in property all over the world ) in the usa its the bond mania . now in india if i speak that the property market is crazy they consider me crazy and are convinced that property rates will never fall .So you know where the bubble is not in stocks but in property all over the world
the next financial crises will create a problem similar to the one which happened in the usa . all the world banks will sink .this will give an opportunity for the usa to change the currency markets to their liking and invest all their dollars which they are getting and companies saving in the cheap stock markets of the world specially asia(read india china ) where the population is very young and growth is a long time reality .there will be a new currency world order .china will be in tatters and may be split into several parts (civil war) so simple when u dont find logic in any markets keep away and sit tight seeing the drama let the giants fight it out . gold is the real safe haven if AT ALL U HAVE to put money anywhere (i am no gold bug). FOR THE MOMENT THIS MUCH IS ENOUGH
Very interesting thoughts.
It seems to me that nearly zero interest rates have been a major prop under this market. That does not occur often. Once the Fed bumps interest rates .25 basis points watch out below because that begins a trend which is not the market’s friend.
It has been 3 1/2 yrs since we have had a market correction. If this market is going to move into a strong wave 5 stage we need to see a 12-15% pullback. I think we are due one more decline in oil and natural gas, the nervousness of higher rates, as well as an approaching seasonally weak time of year could bring this much needed adjustment to set the stage for the final major appreciation in this bull market. In 1986 we saw a major collapse in oil like we are currently experiencing, and the stock market performed very well. But, what happened in October of 1987????