Have the Markets EVER Been this Inefficient?…Yes March 10, 2000

A lot of people on Stocktwits (we skew younger than CNBC ‘B’ is for Blue Pill) do not remember the one trading day that was March 10, 2000.

My friend John Gilbert does and he sent me this email yesterday:

On March 10, 2000, the NASDAQ closed at a record 5,048.62, up 24.1% for the year to date — after gaining 86.5% in 1999.

A conference on optical fiber stocks sells out nearly every hotel room in Baltimore, the biggest stocks on NASDAQ trade at an average of 120 times earnings, and 15% of NASDAQ’s value is made up of companies less than two years old that have never earned a profit.

James J. Cramer, author of the eponymous column “Wrong!” for TheStreet.com, writes that a revival of value stocks “will only happen when the Brocades and Broadcoms blow up. And I don’t see that happening any time soon.” In fact, says Cramer, he’s tempted to short-sell Warren Buffett’s Berkshire Hathaway, betting that the great value investor’s shares are “ripe for the banging.”

BancOne fund manager Chris Guinther sums it all up: “In today’s market, it pays to be aggressive.”

What followed…March 10, 2000 was the absolute peak of the market bubble: In one of the worst crashes in history, NASDAQ plunges -(34.21%) to the close on April 14th @ 3,321.29; and -(60.6%) over the next 12 months. And Cramer’s “Red Hots”? Brocade unravels by -(67.1%), Broadcom collapses by -(84.1%). Meanwhile, Berkshire Hathaway gains +72.2% over the year to come.

Today is March 10 as well. OY!

Despite amazing technology advances and the proliferation of smart phones and people being connected, the market seems to be at all-time high inefficiencies.

China has the equivalent of 50 Manhattans built out (square footage) in the last 5 years.

North Dakota is booming, but nobody wants what they are selling!?

We have an ETF for IPO’s...the ticker of course is $IPO

Stocks are doing this – $PLUG :

You can’t blame the inefficiencies on information.

You can’t blame it on human nature…people will be people.

I guess we can blame the government (we chose them) and the media (nobody is forcing you to read any of it).

It is up to individuals to be responsible with their time and money.

It feels like we are in this era beyond ‘Too Big To Fail’, entering the ‘Too Big to Succeed’ market. Maybe we get a breakthrough and a company busts through $1 trillion in market capitalization. I am starting to feel like this boom may not get us there.

For those that can’t ‘Big’ out of the head…you should read The New York Times piece on Herbalife and Bill Ackman. It’s all rather disgusting and a reminder that more money does mostly mean more problems.

I will stick with ‘Too Small to Fail’. Feels like that will continue to work financially and for peace of mind.


  1. Andrew Pevsner says:

    This quote does a pretty good job of highlighting a major difference between web 1.0 and 2.0 companies: “15% of NASDAQ’s value is made up of companies less than two years old that have never earned a profit.”


    Meanwhile, $FB is the poster child for drawing comparisons to web 1.0 “fads,” and did 1.5BN in net income for FY 2013. (and 2.85B in free cash flow)

    Not saying the momentum continues indefinitely or that $FB’s valuation is efficient, but what a stark contrast. In fact, maybe setting a precedent where it’s AWESOME if a public tech co does any revenue is what pushes this market to the next top.

    • it has paid to just follow price…the world is struggling coming to grips with how to measure companies in a global social world. eventaully the old metrics will catch up but who knows where stocks will be…could tripke first or start reverting tomorrow.

      • Andrew Pevsner says:

        related re following price…does it feel like during this bull market, private markets have been getting more liquid, transparent and efficient while public markets have acted less and less efficient?

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