Friday, May 13, 2016

MONEY | NASDAQ-100 Still Below 1Q2000

The NASDAQ 100 index peaked March 2000. Since then, the index has lost money as of yesterday,
16 years later. That's more than one-fourth of its value in real dollars, not counting fees and commissions.
Wall Street's Sceptic-in-Chief Pam Martens wrote yesterday that when she was in the gym watching the television news she saw a commercial for a financial index that started out:
The power of 100 of the world’s top companies. The power of a proven 15-year track record.
The index fund is PowerShares QQQ, an Exchange Traded Fund (ETF) based on the Nasdaq-100 Index. Yes, the NASDAQ-100 index does include many large companies, starting with Apple.

But Martens notes that start of the "15-year track record" of the index was inauspicious, opening with years of steep declines. On balance, what is the 16-year record of the NASDAQ-100 as of yesterday? Using the chart at the top of this post, which is what you get if you Google "NASDAQ-100", the only number reported in the first quarter of 2000 is 4691.61 on March 24, 2000. (A wider choice of base dates is on Google Finance or Yahoo Finance.)

If we had invested $4,691.61 in the NASDAQ-100 on that March 2000 day, then 16 years and seven weeks later the investment  would be worth $4,342.81 at the close of business yesterday. That's a loss of $348.80 or 7.4 percent, not counting any broker/manager carrying and trading fees, pricing spreads and commissions. So much for the "track record".

A negative nominal return over 16 years. How bad is the return adjusted for the rise in the cost of living during this period? 
Source: BLS inflation calculator.

Adjusted for the cost of living, $4,342.81 in 2016 is equivalent to $3,140.41 in 2000. So the real loss over 16 years 2000-2016 is $4,343-$3,140=$1,203.

In percentage terms, the real loss is $1,203/$4,692=25.6 percent. That's an average annual loss of 1.6 percent over 16 years.