NASDAQ and the Sacking of the Vestal Virgins*

Despite the strong rally in the stock market last week, the collapse of the so-called FANG and FANG-like stocks, save for Apple, continued with a vengeance. In response to very disappointing earnings Alphabet and Amazon sold off big time. In May we wrote referring to the FANG stocks, “the worst of the declines are behind us.” (See: Shulmaven: The Defanging of the Stock Market) Boy were we wrong!

 

The carnage of the FANG stocks has been nothing short of extraordinary with Meta, NVDIA and Tesla as of October 28^th down 74%, 58% and 57%, respectively from their all-time highs. (See Table 1) Even such stalwarts as Alphabet and Microsoft were off 35% and 31%, respectively. Only Apple, whose earnings did not disappoint, is down a modest 13%, far better than the S&P 500.

 

Table 1.

Stock            All-Time High    Oct. 31     % Change

 

Alphabet          150                    97               -35%

Amazon            186                  103               -45%

Meta Plat.        379                    99                 -74%

Microsoft         343                  236                 -31%

Netflix              690                 296                  -57%

NVDIA             330                 138                  -58%

Tesla                 407                  229                 -44%

 

Apple                179                 156                 -13%

          

What all of this is reminiscent of is the 2000 Dotcom crash and the collapse of the Nifty 50 of 1972. In 1997, while working for Salomon Brothers, I wrote of the “Four Horseman of the NASDAQ.” Those stocks consisted of Cisco, Intel, Microsoft, and Oracle. I would just note that only Microsoft has stood the test of time and the stock spent well over a decade wandering in the desert. Nevertheless, those four stocks did far better than such favorites of that era as WorldCom and Enron which went bankrupt

 

Perhaps more than the Dotcom crash, this era is more evocative of the Nifty 50, the so-called one decision stocks held by the trust department at JP Morgan. They were thought to be invincible, and an investor could pay any price for them, sound familiar. However, when the inflation bell rang, they were, in the vernacular of that era, sacked like the vestal virgins of ancient Rome. Many of those 50 stocks have either disappeared or are now shadows of their former selves. Those names would include Eatman Kodak, Xerox, Burroughs, Polaroid, IBM, MGIC, Emery Air Freight, Digital Equipment, Simplicity Pattern, Kresge (Kmart), JC Penny and First National City (Citigroup). It is a reminder that "all glory is fleeting."

 

How many of today’s names will find a similar fates fifty years from now. Of course, there were great successes among the fifty. They would include, McDonalds, Coca-Cola, Disney, Johnson & Johnson, Lilly, Texas Instruments, Merck and American Express. Moreover, the collapse of the Nifty 50 signaled the presence of new 13-year economic cycle. As I have noted previously, I think we are now in such a cycle today. (See: Shulmaven: The U.S. Economy is Entering a New Thirteen Year Cycle)

*For information on the Vestal Virgins of Ancient Rome see: https://www.througheternity.com/en/blog/history/vestal-virgins-in-ancient-rome.html