IS PREDICTION POSSIBLE?
A WORKING HYPOTHESIS With the low of 3227 on April 17, 2000, identified as the end of the “crash,” the Nasdaq Composite index lost in five weeks over 37% of its all-time high of 5133 reached on March 10, 2000. This crash has not been followed by a recovery, as occurred from the October 1987 crash. At the time of writing, the Nasdaq Composite index bottomed at 1395.8 on September 21, 2001, in a succession of descending waves. The Nasdaq Composite consists mainly of stock related to the so-called “New Economy,” that is, the Internet, software, computer hardware, telecommunications, and similar sectors. A main characteristic of these companies is that their price-earning ratios (P/Es), and even more so their price-dividend ratios, often come in three digits. Some, such as VA LINUX, actually have a negative earning/share (of -1368). Yet they are traded at around $40 per share, which is close to the price of a share of Ford in early March 2000. In constrast, so-called “Old Economy” companie
