The Day Nasdaq’s Music Died

Remember those days when you couldn’t go to a gym or a party without hearing someone extol the virtues of a Cisco, a JDS Uniphase or an Ariba? When people equated a stock split with some mystical sign of divine approval? These days, people are marveling at what they would have been marveling at back in the late 19th century -- soaring land values.

Five years ago, the music died on the Nasdaq. The tech-laden stock index reached its all-time high on March 10, 2000, closing at 5,049. The dot-com bubble burst over the next year, wiping out $3.5 trillion of wealth. Wednesday, the Nasdaq closed at 2,061, still nearly 60% off its high.

In retrospect it’s all so obvious -- the frenetic nature of the fin de siecle (end-of-millennium, for that matter) craze, the absurdity of the pie-in-the-sky dot-com narratives that passed themselves off as serious business plans and sober Wall Street analysis. It was a triumphalist orgy of hubris and revolutionary optimism. No more suits, no more gravity, no more price-to-earnings ratios. We were partying like it was 1999, which is why the Nasdaq could soar 2,000 points -- nearly its total value now -- in only four months.

Then came the crash. Prince’s prophetic “1999” can just as well be read as the apologia of a Wall Street dot-com analyst.

I only want U 2 have some fun

I was dreamin’ when I wrote this

Forgive me if it goes astray But when I woke up this mornin’

Coulda sworn it was judgment day

The sky was all purple,

there were people runnin’ everywhere

Tryin’ 2 run from the destruction,

U know I didn’t even care

‘Cuz they say two thousand zero zero party over,

oops out of time

So tonight I’m gonna party like it’s 1999

A lot of investors did suffer grievously on judgment day, and many dreams of early retirement were dashed. But it’s astonishing how resilient the overall economy proved. Unlike previous market collapses here and elsewhere, this one did not lead to a depression. Despite the bubble pop and a host of other difficulties in the last five years, real estate values, consumer spending and the banking sector held up. The old-economy Dow Jones industrial average is down only 7.8% from its all-time high on Jan. 14, 2000.

Beyond the realm of the merely financial, however, the popping of the dot-com bubble presaged a more subtle but significant popping of our nation’s post-Cold War hubris and giddy self-confidence. Americans by the turn of the millennium were willing to think they had reached the end of history, as posited earlier by the writer Francis Fukuyama, insofar as history is perceived as a test or struggle. Hence the suits came off, and P-E ratios were ignored.

Then came all the shocks of the new century. It turned out that America’s vaunted technology couldn’t handle a close election. And while we were partying, a group of fanatics who didn’t think history was over had been plotting the deadliest attack ever on the mainland of the United States. The integrity of our capitalism was also tarnished by the Enron accounting fraud and other corporate scandals.

Needless to say, the cumulative toll of all this on global perceptions of Brand America has been significant, maybe more so than those 3.5 trillion dollars lost on the Nasdaq. It’s been quite a ride since Nasdaq 5,000, and it is likely to be a long ride until we see that benchmark again.