Nasdaq Bubble Stole From Future Returns

Yesterday, we discussed why the Standard & Poor’s 500 Index has gone sideways for the past few months. The prime suspects were rich valuations, earnings crimped by falling energy prices and higher returns to be had overseas.

Today, I want to look at the Nasdaq Composite Index. It closed at 5,056.06 yesterday, surpassing its March 2000 dot-com high. It took more than 15 years to breach that earlier mark. Meanwhile, the Dow Jones Industrial Average and S&P 500 passed their pre-crisis 2007 highs almost two years ago.

The Nasdaq has been the laggard, and there are many questions about why. Does this represent the triumph of value investing over growth? Dividends over potential? Blue chips over sexiness? Or is something else going on?

The answer, in my humble opinion, lies in the nature of secular market cycles. Although we only have a century or two of data, markets seem to alternate between multidecade  booms and busts. Some analysts like to describe these as “secular.” These are different from cyclical markets, which are shorter. The period from 1966 to 1982 was a secular bear market, just as the stretch from 1982 to 2000 was asecular bull market. Compare that with the 74 percent rally that followed the plunged in 1973 — that was a cyclical bull market within a secular bear market.

These are more than arbitrary definitions. Secular markets typically reflect the dominant economic and sociological themes of their eras. Consider the post-War World II period, or the inflationary malaise of the 1970s or even the roaring 1980s and 1990s. Each of these periods can be defined by way of a generational, overriding idea. These were all significant secular market cycles.

I look at three key questions when trying to identify secular markets . . .:

Continues here: How a Bubble Steals From the Future

Category: Markets, Psychology, Sentiment, Valuation, Web/Tech

Is the Nasdaq in another bubble? (An Interactive Journey)

Click for crazy cool an interactive roller coaster. Source: WSJ

Category: Cycles, Digital Media, Markets, Valuation

10 Friday AM Reads

As the week comes to a close, we begin prepping you for the weekend with our expertly curated morning train reads: • Zweig: Don’t Overpay for Technology Again (MoneyBeat) see also Turning the Nasdaq crash and recovery into a POV rollercoaster ride (WSJ) • Michael Lewis: Crash Boys (BV) • Facebook and the Feed (stratechery) see also Facebook changes its…Read More

Category: Financial Press

New All Time Nasdaq Highs

Nasdaq Surge Lifts Internet Boosters of the Past Source: WSJ  

Category: Markets, Technology

1965 Sunbeam Tiger

Looks a lot like the classic MGB GT to me! Inspired by the Shelby Cobra, while eyeing the sales numbers of the larger Ford Mustang, the Sunbeam Tiger was a mashup. Using the same 4.7-litre Ford V8 (200HP). Jensen Motors in West Bromwich, UK produced 7,100 of these V8 muscle-cars between 1964 and 1967. They looked identical…Read More

Category: Weekend

Category: Commodities, Think Tank

Giant Elliptical Galaxy

  Two very different galaxies are drifting through space together in this image. The peculiar galaxy pair is called Arp 116 which is composed of a giant elliptical galaxy known as Messier 60 or M60 (C) and a much smaller spiral galaxy, NGC 4647 (upper right). Image by Handout / Reuters via Buzzfeed

Category: Science, Weekend

The Market Rhythm Deciphered

Source: @Trader_Dante

Category: Cycles, Humor, Psychology, Trading

What is Market Breadth Telling Us ?

During the past few years, I have referred to market breadth as one of the more important metrics of the stock market’s health. As we close in on new highs in the cumulative advance-decline line, it is time to revisit this internal indicator. As the chart below shows, the Standard & Poor’s 500 Index has rallied from…Read More

Category: Markets, Technical Analysis

Spoofing & the Flash Crash

Earlier this week a trader was arrested in London and accused of “spoofing.” What’s spoofing and what does it have to do 2010 flash crash? Bloomberg View’s Matt Levine explains

How ‘Spoofing’ Might Have Crashed the Market

Read More

Category: Legal, Trading, Video