Oh, how times have changed. Can it be that just a year ago the tech
sector was the best thing since sliced bread? Superlatives still abound,
they're just negative ones now, and it seems the markets are the focus
of all the angst.
The Nasdaq is now down 62% from its all time high of 5,049 a year ago,
with dollars 3.9 trillion in paper money having vanished into thin air.
NBC (March 11) labeled this free-fall 'arguably the greatest decline in
stock market wealth in such a short period of time.'
The tech-heavy Nasdaq isn't the only market being hit. The S&P 500 index
also declined by 20%, marking the official start of the bear market. An
analyst told USA Today (March 13), the S&P 500 'more accurately reflects
the good times and the bad times ... Right now, it's not sending us a
signal that the stock market weakness will end anytime soon.'
The bearish sentiment was everywhere. There were nearly six times as
many pessimistic reports than optimistic ones. But who's to blame?
CBS Marketwatch.com (March 13) ran a story called 'Staging a Tragedy:
Wall Street hype had starring role in unrealistic scenario,' reporting
that 'investor expectations have been abused.'
But by whom? Henry Blodget, a Merrill Lynch analyst, took the brunt of
the criticism. NBC (March 11) reported, 'Some accuse the media of hyping
the stocks. Others blame Wall Street analysts, like Merrill Lynch's
Henry Blodget.' The analyst defended himself, however, saying that his
commentary was balanced had people read it in context.
The continued decline has offered the media few new angles to explore,
though one questions persists: 'How low can it go?' But nobody seems to
have the answer.
However, new buzzwords, such as 'capitulation,' are appearing in the
media. In other words, commentators say the only indication of recovery
is when investors are desperate to sell everything in order to escape
with anything. Only when that mass panic or 'capitulation' occurs will
the market reverse course and begin to rise again. For those looking for
terms falling out of favor, take CNN (March 12) which reported that tech
'is a very dirty word' right now.
Just how bad the current situation has become is a matter of
The media noted that, as of March 12, the Nasdaq was in its worst bear
market ever, with only the Great Depression's impact on the Dow having
been worse. Fortune magazine (March 19) stated unequivocally, 'This bull
Others not only pronounced the bull dead, but forecast continued
Some saw the Nasdaq bottoming out around 1,500 while The Wall Street
Journal (March 14) published a somewhat sympathetic feature story on the
publisher of a rather bearish investor newsletter who envisions the
Nasdaq below 1,000.
But a few reports identified a silver lining, including Money magazine
(April 1), whose Wall Street editor-at-large assessed the impact of
current monetary and fiscal policy on the market and concluded, 'When I
put all the pieces together, I see little reason not to be bullish.'
The coverage that did argue in favor of buying more tech stocks,
emphasized that valuations are lower compared to historical averages and
that buying now would be good for investors who bought for the
long-term. But they also stressed the importance of diversification
within one's portfolio.
Meanwhile, the search for the elusive 'capitulation' continues. But with
the lopsided nature of the coverage on the tech wreck, it does not
appear that the love-fest with tech stocks will resume anytime soon.
Evaluation and analysis by CARMA International. Media Watch can be found