Investing
The Visual Market
The Year 2000 in Review

We're taking time out this month from our look at crashes and recessions since 1984 to provide a cap on last year's markets.  ...

Needless to say, for anyone who's been following the market, last year definitely qualifies as a crash -- particularly for the NASDAQ.  Technically, we're not in a recession, which requires consecutive months of negative growth.  But that fact makes little difference when it comes to portfolio evaporation.

 The Net Bubble Finally Burst ...

Numerous analysts had been predicting that the internet bubble would burst.  Perhaps the only problem was that they were making those predictions even before the tech stocks made their now-historical and astronomical run-up's.  In some cases, the dire predictions preceded the fall by as much as two years ... not exactly what one might call timely advice.

A look at tech IPO's that came out of the blocks with unbelievable first-day gains in the couple of years preceding last February's dip, and last April Fools' plunge {and the continuing depression in the NASDAQ} shows that most of them seem to be trading, not simply well off their previous highs, but below their back-room IPO share prices.

One by one, these darlings of the New Internet Economy watched the bottom fall out, leaving them swinging in the gusty breezes of harried trading and, in many cases, big debt and dreadfully decreasing capitalization.  Some have even started to fold.  ...

Probably one of the more notable was Priceline.com, a one-time net dearest that topped out at an intra-day high of 104 1/4 back on March 14th, bottomed out {?} at 1 1/16 on December 27th, and has been trading above the $2 range all day only for the last two trading days -- January 11th & 12th.  ...  Of course, such pricing makes some sense in Old Economy terms, where PCLN's negative ($7.26)/share earnings and, therefore, no P/E to speak of, doesn't exactly place it high on Old Economy brokers' lists.  As for the future of Priceline?  It seems to be anybody's guess.  Among the 18 analysts who are making predictions for next year, the average guess-timate is 3¢/share ... but the range is from a high of 21¢ to a low of negative (11¢).

But PCLN wasn't the only casualty.  Even a relatively strong internet showing like CNet -- with earnings/share of $3.19 and a P/E of 4.25 {well below the old standard of 20.0} -- has taken its hits.  CNet is down from a high last March of $75 to a last close on Jan. 12th of $14.25.  And just the day before, it'd dipped to a 1-year low of $12.75, and this, even after acquiring its major competition -- ZDNet -- late last year ... and still being able to show positive earnings after the fact.  In fact, so new was the New Economy that, even before the tumble after the stumble, solid earnings reports from some players were not enough to hold off subsequent losses.  Why?  We're not sure, but it seems that expectations had gotten to the point where simply beating Street estimates was not enough.  Investors were demanding volcanic growth, and anything less was considered ... well ... Old Economy. 

The Numbers ...

We could probably go on for some time about all this.  But the point this month is really nothing more than a quick and simple look at last year's market performance.  In that vein, we offer the following:  {Please keep in mind that we've been using weekly figures for our charts in The Visual Market.}

Highlights:  

The astounding, if temporary, 133% annual return:  Prior to the dramatic crash of '00, the market indexes had been running up for some time.  But, as you can see from the chart above, the NASDAQ in particular had separated itself from the rest of the indexes.

In early March of 2000, the NASDAQ had reached a weekly high of 5048.62 --  a figure representing a more than 100% gain from June of the previous year ... or a pro-rated annual return of some 133%.  But even the more staid and traditional Dow, as well as the S&P and the NYSE had seen their share of the run-up, too. 

From the end of 1998 to early January of 2000, when it had peaked at a weekly high of 11723, the Dow had picked up more than 27%.  And when we look at the returns for 1999, even the S&P posted a nearly 20% gain for 1999, while the NYSE posted a nearly 10% gain for the year.  On the other hand, the NASDAQ ran up a whopping 85%.  {See table, below.}

All of the indexes, then, did quite well during 1999, despite analysts' predictions that started the year before and persisted throughout that year of a bursting bubble.  Amid all the too-early gloom & doom speculation, the indexes on average posted weekly gains of more 0.5 percent, a mark almost met by the Dow, and more than doubled by the NASDAQ.

Every reasonable prediction will eventually come to pass ... 
We suppose that if one predicts the same seemingly reasonable event long enough, eventually, it will come to pass.  So, after months of dire predictions, it seemed that investors were not likely to heed the continuing warnings.  It had already become a case of crying "Bear!" at least a few times too many.

But come the plunge did, and it seems it has yet to find a bottom foothold.  ...

As compared with the year before, 2000 saw average weekly losses for the collective indexes of nearly -0.3%.  The Dow went down an average of -0.11%/week -- a turn of more than 0.5%.  The same held for the S&P, which went from weekly gains in '99 of 0.38% to weekly losses in 2000 of -0.21%.  For better or for worse, the NYSE was relatively spared in 2000.  After having posted an average weekly gain of just under 0.2% for '99, it remained relatively unchanged in 2000.

The real story, of course, as everyone expected, was the dramatic turn-around on the NASDAQ.  After posting an average weekly gain of 1.25% for '99, 2000 saw the Tech Heavy give up -0.85% per week -- a change from the prior year of more than 2%/week.

A Few More Tid-Bits ...
While 2000 was not a year of all-time weekly records for all of the indexes, some all-time records were set.  Here is a sampling:

• The NASDAQ posted both its largest weekly gain and loss ever during 2000.  The largest weekly loss came for the week ending 10 April, during which the NASDAQ lost more than 25%.  Strangely enough, the largest weekly gain came after its initial free-fall in April when the index picked up nearly 19% for the week ending 29 May.  Needless to say, that was only one of a number of false starts at recovery to date.
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• The Dow, while not setting an all-time record, did post its largest weekly gain in 2000 when it rose more than 6.7% for the week ending 13 March.  {The Dow's biggest weekly gain came during the Depression in 1932, when it picked up more than 22.% for the week ending 1 August.  It's largest weekly loss came less than a year later when it gave up more than 16.5% for the week ending 17 July.
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• Finally, for those who like to track such things, despite last year's drops, each of the indexes has still managed to post average weekly gains at or in excess of 0.25% per week since the inception of the NASDAQ in October of 1984.  Since then, the Dow has averaged an annual return of 14.718%, the S&P, 13.839%, the NYSE, 12.785% ... and the precocious NASDAQ?  An annual return of 15.896%.  That's still a far site better than most bonds and money market funds ... providing you don't try to cash in on individual dot-com's.

We'll return next month to pick up where we left off -- with Crashes & Recessions since 1984.  And if the current market is any indication, we'll still have the current Bear Market to examine a bit more closely when its turn comes some three months from now.  ...

lmc       

Viewing the Charts:  The charts were all compiled with Microsoft Excel from weekly market data for the specified periods.  The charts which appear on this, the main Visual Market page,  are not intended to be the best quality.  But for any fuzzy chart, you can simply click on it for the larger version [best viewed at 800x600 or better] ... or, if you'd like your own copy, simply right-click on the chart below and choose "Save Target As."  From there, you simply pick a folder on your computer where you'd like to save it. 

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