Callaway: This time Nasdaq 5000 is different
WASHINGTON, D.C. — Told ya the Nasdaq was a buy at 5000.
OK, so it took 15 years, two presidencies, a couple of wars, a tech bubble collapse, a massive terrorist attack, a global financial crisis, and the rise and fall of reality TV. But hey, we're in for the long haul, right?
Our fathers' fathers, who purchased an equivalent of the Dow Jones Industrial Average at the peak of the market in September 1929, had to wait 25 years, until November 1954, before it recovered its Roaring '20s high. Times were tougher back then.
The world is much different even than it was in March 2000, when the Nasdaq last topped 5000. But tech stocks still light the imagination of those who seek fame and fortune. The Nasdaq's previous peak came only 18 months after Google was founded. Twitter didn't exist. Snapchat? Go on. Apple was still seven years away from introducing the iPhone. Everything we take for granted these days was still to come back then, yet we were excited about the future of tech. And willing to bet on it.
Those bets spectacularly exploded in the months after we all miraculously survived the Millennium Bug, and it appeared nothing could stop us. First it was a couple of quarterly earnings warnings; Microsoft, I remember. Then advertising sales began to disappear. Then scores of Internet companies followed advertising down the hole. Because the bubble was supported by new Internet companies advertising on the sites of older Internet companies — a digital Ponzi scheme — the collapse fed on itself. By mid-2001, we were in full-blown crisis. Then 9/11 hit. The bottom fell out.
Still, there were those of us who argued the washout was healthy for the market as a whole, and that it could not keep going down. I remember appearing on a technology TV channel — now defunct — in San Francisco in November 2000. In only six months, the Nasdaq had fallen 2,000 points and was close to falling below the 3000 level for the first time since passing through it on the way up the year before. I argued that after losing 40% of its value since peaking, the 3000 level would hold.
Maybe guests like me were the reason the tech channel failed. The Nasdaq fell another 2,000 points from there, finally bottoming in October 2002 at 1108, a 78% decline. Even the declines in the global financial crisis six years later wouldn't equal those levels of loss. A generation of new investors had been blown out. Still, unlike with the global crisis, there were other places for the smart money to turn. Commodities such as oil and gold were rising. Real estate was still strong. Wall Street simply blew a few new bubbles out of the old tech one.
Photos: Look at tech leaders then and now
Many companies that survived the collapse never really recovered, though. Yahoo, for example. AOL. Others, such as Amazon, successfully kept iterating and trying new businesses. My old company, CBS MarketWatch, sold itself to Dow Jones, another survival strategy. It was one of only two Internet ventures out of a portfolio of 30 companies invested in by CBS that had survived.
Nobody, nobody thought it would take this long to get back to 5000, though. Especially with the gains in recent years, and the rise of a new army of dynamic digital companies — this time with profits. But it was a bigger bubble than anyone realized, and we all have had to put in the patience to get back to this level. Now we are here.
Many will argue that the scaling of the previous peak is a sure sign we are ready to collapse again. The wobbly euro, war in the Middle East and the Ukraine and an economically humbled China are just four good reasons to believe so. This bull market is old, for sure.
Yet the promise of the first tech bubble — that the Internet would change the world — came true in the years since the financial crisis of 2008 and 2009. It took some time, and a herd of new companies and young entrepreneurs, but it's happening. Fifteen years from now, who knows what little-known companies today might capture our imaginations.
Forget electric cars from Apple, think holograms and virtual reality. There will still be wars and terrorism and recessions. There will also be opportunities galore for investors.
My ill-timed purchase of the QQQ Power Shares Trust ETF, which mimics the Nasdaq, in that March of 2000, has long since been back in the black, thanks to the magic of re-invested dividends. Still, it's good to have lived long enough to see the actual number 5,000 achieved, and my wise words from the turn of the century finally proved correct.
Onward to 10,000. There are still peaks to scale and bears to slay. Like I always say, usually just before the freight train hits, this time it's different.