The Nasdaq is up 95% since February 12, 1999, and it has already dipped about 10% on two different occasions this year, in January. Rebounding quickly, today the Nasdaq made another record high, gaining a monstrous 2.8%.
"Only 2.8%?" you might say. "Big deal. It gained at least 3% on several days this year."
True. And unusual. And it won't last.
Do you remember when a 1% move in a single day was a big deal? The past 18 months, however, this volatility has become the norm! In fact, now if the stock market doesn't move at least 1% in a day, it's news. "Stocks were quiet today, only up 0.3%."
This demonstrates how quickly investors become accustomed to extreme volatility, but perhaps only as long as most of the volatility is upward. Almost certainly, though, Nasdaq stocks won't continue this rampage. Not at this rate. And just so we don't all look like idiots to future historians: yes, we ARE aware that stocks without any earnings are soaring over the past year, while stocks with solid earnings are falling daily.
What can we say? Investors see a large future for young companies making investments in the Internet, in technology such as wireless, in biotech and elsewhere; meanwhile, investors don't seem interested in bidding up old companies, even those with steady earnings. The past 18 months, the party is on Nasdaq.
But it can't last. At least not like this. Nasdaq stocks may even fall significantly before this year rings out. Nobody knows. As long-term investors, we're simply banking on the value of good companies to be appreciably higher in 10 years. We don't pretend to know what will happen in the meantime. We're merely watching this wild roller coaster, not "betting" on it near term.
Perhaps many others aren't, either.
Bears and Bulls
The Communion of Bears message board on the Fool has received nearly 25,000 posts over the past three years, while the Communion of Bulls board has received only 4,900. So, is the Fool's community five times more bearish than it is bullish? No. Thankfully not!
However, there is usually more impetus, and it's usually easier and more entertaining, to write bearish arguments. Even so, the disparity in the number of posts between the two boards is somewhat telling. As the stock market has soared, the voice of the bears on our boards has grown increasingly loud.
Contrarians call this a good sign. A stock market climbs a wall of worry, or doubt, because as long as people are bearish, buyers remain on the sidelines, steadily giving in and finally buying stock, thereby pushing the market higher. As soon as everyone is bullish and has invested, there isn't any money left to go into stocks, so the market is ripe to decline. At least, that was the saying many years ago.
Nowadays, with so many Americans regularly putting money into stocks on a monthly basis (straight from their paychecks), this old rule may not hold so true. As of the 1990s, stocks are no longer an investment vehicle for the Wealthy and Wise alone. Given this, the buying power of a steadily investing public -- a public largely using the stock market as a long-term savings vehicle -- may have changed the rules some.
Still, the Nasdaq won't keep soaring this way. Enjoy the times that we're seeing now, fellow investors, because money and wealth is rarely this easily, or quickly, created. It will at least slow and, for intervals of time, stop.
"We Demand Wap!"
Which Rule Breaking industries have we not invested in yet? Plenty! Wireless and telecom among them. Software another. And hardware in general!
On the Rule Breaker message board, Fools recently asked that we specifically address two sectors (WAP and telecom) and consider buying stocks in them. One post was titled "We demand Wap!" (wireless applications protocol). More than anything, this person is asking, "What's the Fool's take here?" That's a legitimate question to ask on The Motley Fool, but an answer to your question shouldn't end up dictating your investment decision, anyway.
We have mentioned biotech, wireless, telecom, and online business-to-buinesss commerce as areas of interest. (The next Motley Fool Internet Report will be on business-to-business commerce.) The Rule Maker Port has been studying companies in many of these industries, too. The point to make right now, however, is the same point that floggercat made on the RB board in this post, which is: the best person to do the comparative research and make the final decisions is you, typically along with the Fool community. Waiting for "the word" from one source (this portfolio) wouldn't be Foolish. That is one reason why we're launching Fool Research next week: to comprehensively help investors make better decisions by offering objective analysis and full information on companies on an ongoing basis.
You demand "Wap," and we're not keeping it from you. Of course, we agree: it's an interesting, high-growth industry, and we're glad the community is all over it. Together, we may find the best wireless Rule Breaker yet.
Excite@Home and @Starbucks
Starbucks (Nasdaq: SBUX) recently announced that same-store sales for stores open at least 13 months jumped 11% in January, compared to an already healthy 7% rise last year. The company also announced its 100th store opening in both Japan and the U.K., as international expansion continues unabated. In fact, international expansion is going even better than hoped, which CEO Howard Schultz shared on last week's Fool radio show. The company is probably on its way to 20,000 stores worldwide, long-term, and Starbucks is confident that it'll reach its goal of 500 locations in both the Pacific Rim and Europe by 2003. Exciting?
If only Excite@Home (Nasdaq: ATHM) were excited. The stock has sunk ever since AT&T (NYSE: T) announced that it would share its cable lines, and even before that the stock drifted due to fears of court rulings that would open the cable to competitors. Excite properties will soon be spun into a tracking stock, which could unlock some value for shareholders. The company is still top dog and first mover in the Internet cable industry, and it still has many advantages, but does it have sustainable advantages? The ATHM board continually has analysis.
Celera or Darts?
Celera (NYSE: CRA) jumped over 13% after it was chosen by a broker in The Wall Street Journal's old fashioned "Pros vs. Darts" match. I haven't seen the article; just read about it online. In years past, it seemed that the pros lost to the darts more often than not. Go figure. Maybe this time'll be different. Hey, maybe he's even a pro Fool.