“The Nasdaq closed Monday at 5,008.10. It’s the index’s first taste of the plus-5,000 stratosphere since those heady days of March 2000, when it topped out (on March 10) at 5,048.62. …
“[Is this] the new Nasdaq, nothing like the old? The latter case is what you’ll hear from, well, Nasdaq itself. … The index has only about half as many stocks now as it did in 1999 (about 2,500 versus 4,700), the exchange observed, and on average the companies are about twice the size they were back then. Price/earnings ratios are much, much lower — 152 at the end of 1999 and only 31 at the end of 2013. (Now it’s about 27.) …
“This implies that the Nasdaq has a lot further to go before it runs out of steam, unlike the 5,000-handle Nasdaq of 2000. But there still are glimmers of the frenzy of the past. They’re worth watching very closely. One is that bidding for stocks and companies in particular segments is still euphoric. Slap a ‘social media’ tag on your company, and watch the numbers rise. …
“[I]t’s wise to recall that bubbles, like gamblers’ winning streaks, generally are only visible in the rear-view mirror. The economists Kenneth Rogoff and Carmen Reinhart came to that general conclusion for a 2009 book after studying eight centuries of booms and busts. Their title quoted the claim one always hears about market frenzies, often just before the crash. They called it: ‘This Time is Different.'”
— Excerpt contributed by Jason Kelly
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