Wall Street History
The Bubble, Part II
Continuing with our discussion of the Great Tech Bubble of
1999-2000, we pick up the story for the week of 10/18-10/22,
1999. The following thoughts and comments were taken from
my "Week in Review" pieces. All quotes are from yours truly,
unless otherwise indicated. Also, some of it is choppy as I am
picking and choosing topics designed to give you a sense of the
investment picture during this period. In other words, this will
not be submitted for consideration by the Pulitzer folks.
10/23/99 - Mentioned stocks like Raytheon, Unisys, Xerox,
Hewlett Packard, Compaq, and IBM as being demolished. 40%
of NYSE issues are off 30% or more from their highs. [Stealth
Russell 2000 is still down for the year. Year-to-date, thru 10/22,
Dow Jones +14.0%, Nasdaq +28.5%, Russell 2000 -0.8%.
Nasdaq finishes week up, now at 2816.the first of what will be
11-straight up weeks. Dow sits at 10470.
My broker buddies tell me that investors don''t understand how
their own portfolios can be down when the major indexes were at
3rd quarter earnings up 24.5% for first 60% of S&P 500 to report.
Economies around the world gaining steam.
Consumer confidence is still very high, though it''s been slipping
a bit. Nonetheless, "Christmas is shaping up to be a great one."
IBM dropped from $112-$90, intra-week, after warning of
slowing sales post-Y2K.
Rudy Giuliani leads Hillary in the polls, 51-40.
A full-time British butler costs $50,000.
Martha Stewart goes public with her offering priced at $18 and
finishing Day One at $35 (after hitting $52). WWF also goes
public, $17, closing at $25.50.
10/30/99 - GDP for 3rd quarter comes in at 4.8% with no
Microsoft and Intel are added to the Dow along with Home
Depot and Southwestern Bell (SBC). Sears, Chevron, Union
Carbide and Goodyear are thrown out. Sears'' management is
Bush leads Gore 49-39 nationally.
Nasdaq up to 2965.
11/6/99 - George W. Bush unable to name specific world leaders
when queried. I blast him but add, "(At least) he would have a
cabinet loaded with experienced, respected hands like Colin
Powell and Dick Cheney."
Dow Jones closes at 10704. Nasdaq hits 3102; winning streak of
6 straight sessions.
Market breadth, a concern of many, improves substantially with
7 straight days of more advancers than decliners.
Unemployment rate falls to 4.1% for month of October. Still no
signs of inflation.
Qualcomm rose 32% for the week.
Fed Chairman Greenspan gives a speech wherein he notes that a
boom in home sales has had a bigger impact on the country''s
prosperity than soaring stock prices. "(And) while home prices
do on occasion decline, large declines are rare."
30-year Treasury yield falls to 6.04% from 6.40% just two weeks
European Central Bank and Bank of England raise interest rates.
Judge Jackson ruled that Microsoft was a monopoly.
It was discovered that Al Gore was paying feminist Naomi Wolf
$15,000 a month as a consultant. She was responsible for Gore''s
makeover; employed earth tones. [The fee was reduced to
$5,000 after the uproar.]
Doonesbury is running a hilarious spoof on IPO mania.
Nymex crude oil hits $23.
11/13/99 - Fed President William McDonough says, "One
should not assume that the American economy can keep growing
faster without inflation."
UPS completes the largest IPO in history, $5 billion.
Qualcomm hits $380 (up from $25 in March).
Online trading activity picking up again after a slump.
Jerry Seinfeld gets engaged. "Bubbleboy" computer virus is
introduced. "Pokemon: The First Movie" hits the screens.
Parents take their children out of school to see it.
Dow closes at 10769; Nasdaq, 3220 (10 records in previous 11
sessions), and is now up 46.9% on the year.
Oil closes at $24.91 on the strength of falling inventories.
11/20/99 - U.S. and China sign trade pact. All things China
soar. China Prosperity went from $1 to $80 before finishing the
week at $12. [Don''t know if it still exists.]
Federal Reserve raises rates for the 3rd time of the year (others
being 6/30 and 8/24), adopting a "neutral bias" on their future
SEC beginning to look into methods some Internet companies
employ to mislead investors, for example, booking barter
arrangements as revenue.
Watched animated clip from Pokemon movie; saw better
animation in "Speed Racer."
ABC raking it in with "Who Wants to be a Millionaire?"
Dow closes at 11003. Nasdaq up to 3368, rallying 23% in just
the past 5 weeks.
Oil hits $26.56.
11/27/99 - Russians blast Grozny to pieces. Putin''s poll #''s
keep rising while Yeltsin is basically incapacitated.
On Tuesday, Ariel Corp. traded at $3. On Wednesday, the stock
hit $10 as the company announced that governments worldwide
were approving the use of its new modem card for Internet
access. By Friday morning (after the Thanksgiving holiday), the
stock hit $56 (before closing the day at $37). [As of 1/3/01,
Ariel was at $1] I commented:
"So there you have it, the friggin'' feeding frenzy continues. If
you own the stuff, take your spouse or mistress out to the finest
restaurant.light a stogie and say, ''Thank God I''m in America.''"
And."Suddenly, many folks are talking about the Fed raising
rates again, maybe in February! Weren''t these the same
characters who said less than two weeks ago the Fed was
finished until at least next summer?!"
Japan''s debt to GDP ratio now exceeds that of Italy.
Bush leads Gore 49-43.
Sales of premium cigars have fallen 27% over 1998.
"Y2K the Movie" aired. I was one of five to watch it.
Serious crime down to lowest level in 25 years.
Nasdaq at 3446, up 56% ytd; 16 records in 20 sessions.
12/4/99 - Christmas season looks robust; consumer confidence is
rising again after 4-month slide.
November employment report: Unemployment rate remained at
4.1%. Average hourly wages rose just 0.1% for the month, a
I visit my friend Wayne who manages a local Record Town.
"Brian, it''s so busy, it''s unbelievable." But Wayne can''t find
any good help as he has to fire two hires their very first day for
Plains All-American Pipeline LP had to take a $160 million
charge due to rogue trader who guessed wrong on oil prices.
Protests at opening of WTO summit in Seattle.
Al Gore continues to totally ignore Clinton.
Strategist Ed Yardeni turns less bearish on Y2K. I feel
Comedian Chris Rock suggests a new game show for the
children of NBA stars, "Who''s Your Daddy?"
Dow closes at 11286; Nasdaq, 3518.
12/12/99 - Federal Reserve releases "Beige Book," a survey of
the current economic environment in the Fed''s 12 districts. The
economy continues to exhibit "moderate to strong growth".rate
of increase in salaries and wages does not appear to be
Example of Nasdaq''s narrow leadership: Through 12/8, 2158
Nasdaq stocks are up for the year vs. 2149 that are down.
WTO talks wrap up in Seattle with Clinton officials describing it
as a "circus" and a "fiasco."
VALinux IPO priced at $30 and hits $320 before closing the first
day at $239, the largest first-day performance in IPO history.
[As of 1/3/01, the company trades at $9] Freemarkets goes
public, priced at $48, finishes first day at $280. [1/3/01 - $22]
Nasdaq ends the week at 3617.
12/18/99 - Nasdaq rises a 9th consecutive week (3752) and is
now up 71% on the year. Dow hits intraday high of 11380,
before closing the week at 11257.
Abby Cohen issues her year 2000 forecast, calling for Dow
12300 by year-end.
"Bricks and mortar will make a comeback," I say, versus e-
commerce plays. "I expect many Internet stocks to crater, soon."
Charles Schulz announces his retirement.
President Clinton has the flu. Jay Leno comments that with
some of the women the president has been associated with, it
must be "swine flu."
12/23/99 - Nasdaq''s winning streak hits 10 weeks (the longest
such streak in 10 years), and now stands at 3969. Dow (11405)
and S&P 500 also hit records.
Interest rates were climbing with the 30-year Treasury back to
6.46%, the highest level in 27 months.
Fed kept "neutral" posture at their year-end meeting, but said
were it not for Y2K they would have raised rates. Also said they
would assess post-Y2K picture in February.clearly concerned
with strong growth.
Major European continue to soar. I comment:
"The euphoria in our own equity markets is unprecedented
(except maybe 1929). Some of these companies that are priced
at $400 or $500 per share may be solid citizens but c''mon!.
Geezuz, I wish Lawrence Welk were still alive so we could all
dance to his bubble machine."
Economist Henry Kaufman: "Every optimistic forecast about the
economy is based on the premise that stock prices will either go
up or change very little. Not since World War II have we been
so dependent on the market."
Prudential''s Ralph Acampora calls for another 25% gain in the
averages in 2000.
AOL went public on 3/19/92 at a split-adjusted 9 cents a share.
At its current $80 value, it''s up well over 90,000%.
Margin debt is up over 46% from year earlier levels.
As of 12/22, 50% of the issues on the Nasdaq were down for the
Jeff Bezos named Time''s "Person of the Year."
Atlanta Braves pitcher John Rocker makes disparaging
comments about New Yorkers in a Sports Illustrated article.
12/30/99 - Nasdaq finishes the year up 85.6%, 4069. Dow
closes at 11497, up 25.2%.
Nasdaq registers the best year ever for a major index.
Oil closes at $25.60. Average price for the year is $18.00.
Consumer confidence has rebounded to its highest level since
October 1968. It would appear that retailers had a spectacular
Christmas with sales increases in the neighborhood of 7%.
Markets from London to Frankfurt to Hong Kong all register all-
time highs. [Even Tokyo finishes the year at a 52-week high.]
"No one can ever recall such synchronized performances."
On Wednesday, an analyst at PaineWebber initiates coverage on
Qualcomm and sets a $1,000 price target. The stock had already
risen from $25 in March to $500 when he issued his
pronouncement. Boom! Qualcomm shot up to $659 in one day.
Thursday morning it ran up to $740 before selling off to $660.
"Yes, this one issue epitomizes the whole technology sector''s
stupendous performance this year. Forget traditional valuation
measurements, just think ''potential.''"
The yield on the 30-year Treasury rose over the course of 1999
to 6.45% from 5.09%.
Bart Simpson: "I will not sell my kidney on eBay."
"Many of the etailers are struggling for a formula as they burn
through their capital."
Time selects Albert Einstein as "Person of the Century."
Next week, the story of the Great Tech Bubble continues.