The Nasdaq - going nowhere for 15 years

This was the day that many market-watchers thought they would never live to see: the day the Nasdaq Composite index closed at a new all-time high.

The last time it did so was on March 10, 2000, at the top of arguably the single most grotesque bubble in stock market history. Within a month it had fallen by more than a third.

The valuations the Nasdaq hit at that point were so extreme that many assumed it could take a lifetime to get back to a new high. This was not unreasonable. US stocks at that point were more overvalued by sensible long-term metrics than at any other point in history.

Nasdaq stocks looked more expensive even than industrial stocks had done before the Wall Street Crash in 1929 - and it had taken until 1954 for them to set a new high.

In history's other great bubble, Japanese stocks peaked on New Year's Eve 1989. A quarter of a century later, Tokyo stocks remain almost 50 per cent below that peak.

So the recovery of the Nasdaq is genuinely remarkable and is backed, hearteningly, by truly remarkable corporate performance. Apple, still a year away from the launch of the iPod in March 2000, leads the pack. It appeared in the dotcom era to have decisively lost its war with Microsoft. But since then it has gained 4,200 per cent while the Nasdaq has been flat. Its extraordinary success - achieved with profit multiples that still make it look cheap - is the single biggest factor in Nasdaq's recovery.

But buying the Nasdaq at its last peak would still have been a terrible idea. Scarcely any equity market anywhere has fared worse. Even Argentina's Merval index, despite the disasters of default and devaluation in the interim, has gained 135 per cent.

Those who dared to be contrarian would have trounced those who jumped into the hot stocks of the Nasdaq. According to Bloomberg data, five stocks in the S&P 500 have risen more than 1,000 per cent since then. For those who could not foresee the iPod, iPhone and iPad, and missed out on Apple, there was always the Ball Corporation, which makes cans, VF Corporation, which makes jeans, and CSX Corporation, a railroad. All were industries that appeared to be in terminal decline 15 years ago.

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