On March 10, 2000, the Nasdaq Composite reached new heights. On that day the principal indicator for the technology sector hit its highest level since its inception in 1971, closing at 5,048 points. This figure was only a reflection of what had happened across a global economy in which the Internet was a shining star and startup internet companies were appearing every day.
It hardly seemed important that share prices were high or that their profits were only a mirage seen in the distant future. For these reasons, the price for investing in Nasdaq in 2000 was high. The PE ratio for some stocks was 80 or even 100 in 2001. Twelve years later, the picture of what was happening looks a lot clearer.
Continual market volatility has kept the Nasdaq Composite from breaching, until this March, the 3,000 point barrier. The difference between now and the bubble era is that now the PE ratios look more affordable considering that the average Nasdaq PE ratio is 15. In other words, 85% less than in 2000.
A growth indicator
To win. That was the goal for every investor who put his money and faith in stocks tied to the Internet. The whole world wanted to get rich quick through Internet stocks, and few indicators were able to predict the dark clouds that would come. In fact, on March 10, 2000, the very same day the Nazdaq hit its high, it would start its sharp and long decline.
The burst of the tech bubble proved that hopes for this sector were being fed by dreams and not reality, because earnings never came for many of the tech companies, some declaring bankruptcy and others simply disappearing. 240 companies that were registered on the index saw their share prices drop below one dollar within thirty days.
