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Hot NASDAQ Stock Index Is Still Down 31.6% After Inflation

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It has been over 14 years since the NASDAQ index touched an all-time high of 5132.52 on March 10, 2000, signaling the end of the “dot-com boom.” By closing on Friday at 4,726.81, the tech-heavy, over-the-counter stock exchange is only 6.2% from topping the previous record high.

Although there is a lot of chatter about the +20% positive move up for the index in 2014, the inflation adjusted “real” price, based on the Consumer Price Index (excluding dividends), is still down -31.6%.

The “real” pain for many investors has not been limited to the NASDAQ. Despite rising +34.8% since its 2000 high on March 24, the Standard & Poor’s Index after-inflation is down -1.7%. The market hero is the Dow Jones Industrial Average that rose +52.0% from its 2000 high on January 14, but that gain is only +10.8% after inflation.

The hyperventilating talking heads on CNBC market news on Friday were blathering about how the hot NASDAQ stock market is built on solid companies with outstanding growth opportunities. But it would seem wise to remember that the media offered similar enthusiasm and fundamental justifications for sky-high stock valuations in 2000.

From its 5132.52 peak on March 10, 2000, the NASDAQ Composite Index relentlessly lost -78% of its value until hitting bottom on October 9, 2002 at 1114.11.

Investors wanted big ideas more than solid business plans in 2000. Companies with little experience and no sales were able to go public and raise hundreds of millions of dollars as long as they used flogged buzzwords like “networking,” “new paradigm,” “information technologies,” “consumer-driven navigation,” and “tailored web experience.”

Pop culture high points (or low) for 2000 included: reality TV’s “Who Wants to Marry a Millionaire?”; MP3 digital music; Harry Potter’s fourth novel; anime cartoons; racer scooters; flip phones; Digital Versatile Discs (DVD); Elián Gonzalez back to Cuba; and Budweiser’s “Whassup?” beer campaign.


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