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October 27, 2006

NASDAQ at Five Year High

Just as I predicted, we saw a five year high for the NASDAQ yesterday, when trading on the market pushed it up to as high as 2,379.29 points before settling back at 2,379.10 on close - beating the five year by 4.10 points.

With rates looking unchanged - now standing at 5.5% - and billion dollar plus valuations for new unproven tech business models, the market scenario is looking more and more like an instant replay of 1994. All we need now are one or two big IPO's.

*UPDATE* October 28, 2006: Welcome Instapundit readers! Thanks for dropping by. This is a blog about organisations, markets, the global economy and everything in between. Feel free to take a look around, comment and of course, come back!

07:27 AM in Finance | Permalink

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Comments

Does this mean you think we'll see another tech bubble? Are we there already? My view is that tech bubbles are historically inevitable. Human nature just does not change. The question is, have we arrived at a peak yet (I personally don't think so).

Posted by: Mister Snitch! | October 27, 2006 at 08:36 PM

Bubbles are a great point to bring up Mister Snitch! and I'll address the subject in a post of its own.

In summary though, it's more 'innovation bubbles' that we tend to see combined with increased access to capital markets so you get all those people who have never traded before suddenly pouring money into the markets - in the 20's it was shipping (South Sea) which started it, in the 80's and 90's it was tech, in China recently it's been manufacturing (then banking then pretty much the whole economy).

NASDAQ is certainly going back to 5,000 - for that market to reach a bubble we'd have to see about 7,500 now I think.

We're in a cyclicar (short term) bull market right now; if that develops into a seclucar (longer term) bull chances are we'll see the start of a bubble. Saying that, when News Corp and Google pay one billion plus for unproven tech brands, I guess you could say momentum is building towards a bubble of sorts already.

Certainly, it's straight up with a few downswings from here on. It'll be a bubble with some juice in it this time though.

Posted by: Daniel M. Harrison | October 27, 2006 at 08:45 PM