5 Thoughts on NASDAQ 5,000

We wanted to wait for the dust to settle a little bit before diving into the NASDAQ hitting a new all-time high, and after all – we’ve been waiting 15 years for it to happen, so what’s a few more days. This is sort of like the lady who didn’t train for a marathon finishing 6 hours after the winners. Although nobody shows up to shower her with press, this is a reason for celebration in the financial press! Here’s our quick thoughts on something that took forever to happen.

1. That was Great Depression-like…

Our friend Dana Lyons had a wonderful post on the NASDAQ hitting new all-time highs for the first time in 15 years, showing that a major US market index (Japan’s 25 years and counting competes if looking globally) hasn’t gone that long between new highs since the Dow Jones took 26 years to recover from the Great Depression. For those counting at home, that’s been 60 years since such an event. Although the event was really the fall, rather than the recovery… but more on that in a bit.

15 Year Drawdown(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Dana Lyons

The Blue line above is what we in the business call Drawdown Duration. It’s the length of any peak to peak period, or between new all time highs.

2. Would you Invest in this Track Record

Here’s the Nasdaq over the past 15 years displayed as we would analyze a hedge fund or managed futures program. After all, an index is a sort of trading algorithm (as David Harding said) deciding when to buy when to sell certain assets (all tech stocks in this case).

Would you invest in this trading model after seeing these stats? Would you touch that DD, that Comp ROR?

Table of NASDAQ stats_2(Disclaimer: Past performance is not necessarily indicative of future results)
Data Courtesy: Yahoo Finance 

3. Where’s the performance chasing inflows?

Based on the latest statistics reported by the Wall Street Journal, the average investor is thinking this is as high as it’s going to get, at least for now.

“Investors last year pulled a net $11.4 billion from the….Invesco PowerShares QQQ ETF …informally known as the Qubes. It was the biggest outflow in the 16-year history of the fund and the biggest outflow of any U.S. ETF last year.

Even as the Nasdaq kept climbing, investors have pulled out $2.7 billion from the Qubes this year through Friday. By comparison, the ETF that tracks the Nasdaq Composite, called the Fidelity Nasdaq Composite Index ETF, had inflows of $106 million last year and inflows of $75 million so far this year, according to investment-research firm Morningstar.”

The Wall Street Journal suggests that the biggest reason the Nasdaq ETF $QQQ at one point represented 40% of the trading volume at the American Stock Exchange, was because investors wanted to be in on the rise of the tech industry. But as we have previously shown, the NASDAQ is only 58% technology. There’s also healthcare, consumer staples, and more in there.  Contrast that with the specialty tech specific ETFs out there today which 80-95% of the ETF invested in tech and you can see an argument for moving into smaller, more focused ETFs. Perhaps that’s what’s going on. Or maybe these type of investors could be just as happy buying and holding $AAPL, $FB, or $TSLA then an index that supposedly makes up tech companies.

4. That straight line up looks eerily familiar

 

Ignore the near identical vertical accelerations into that peak and this one… and fact that prices plummeted 73% after the last run up like this. This time is sure to be different (wink, wink).  Who knows where things go from here. Brian Belski, a chief investment strategist at BMO says, we’re not even close to a bubble.

“Stop with the bubble nonsense,” counters Brian Belski, chief investment strategist atBMO Capital Markets. “Just because prices go up does not mean there is a bubble.”

To have a bubble, Belski says, you need excessive bullish sentiment, excess available credit and “sexy” investment themes, none of which are visible right now.

“This is a bull market where everyone cannot wait to call the top, that’s not a bubble,” Belski says. “People keep doubting Apple and Microsoft and continue to predict their imminent demise. That’s not a bubble.”

But there’s also plenty of people who say this is looking very toppy. CNN Money asks, “Are You Sure There’s No Bubble Lurking in the NASDAQ This Time?

“After showing major promise, biotech stocks have consistently found a way to let investors down — like in 1986, 1987, 1992, 1994, 1997-98, and pretty much from 2000 to the start of 2009.”

Love him or hate him, Mark Cuban says we’re in a tech bubble worse than 2000.

“If we thought it was stupid to invest in public internet websites that had no chance of succeeding back then, it’s worse today.”

Only time will tell, but surely the odds are greater of a big sell off than they were 5 years ago.

5. Clint Eastwood does the Nasdaq

But enough with words, let’s see how the NASDAQ looks in Clint Eastwood characters
Nasdaq Infograph_6

 

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.