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Recalling Nasdaq All-Time High

Douglas A. McIntyre

March 10, 2000. Nasdaq intra-day high reaches 5,132.52 -- a record. It closes at 5,048.62 -- a record, too. The good times rolled. Trading today at about 3,700, it will never get back above 5,000 again. The companies in the index have too much competition.

The primary reason the record will hold forever is that investors are not stupid enough, or crazy enough, to drive the index so high. The peak pre-supposed that Microsoft Corp.'s (MSFT) market value was twice what it is today. Cisco Systems Inc.'s (CSCO) was so much higher then because it was the sole provider of routers, the core to the future of broadband. Cisco has several impressive competitors now. Intel Corp. (INTC) had a colossal value then, based on sales forecasts for the personal computer that ran has high as infinity.

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The primary reason that the index will not reach 5,000 again is not because tech has become any less attractive as an investment. It is that the largest Nasdaq stocks have too much competition. Apple Inc. (AAPL) has led the index in value for three years, and its business has been shredded by Samsung and others. The company in the index that probably has the most promising future is Google Inc. (GOOG). However, its growth has slowed. Its future in China, the world's largest Internet market, is doomed. Like Microsoft, it has grown so large and has so much market share in some regions that it has become the world's primary antitrust action target.

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Amazon.com Inc. (AMZN) often is mentioned as another public company with unlimited prospects. That is not true -- if investors read between the lines of what founder Jeff Bezos says. He claims the most rapid growth the e-commerce company will post is at its Amazon Web Services (AWS), which is its play in cloud computing. Unfortunately, a handful of other large companies have attacked the same market -- Microsoft and Google among them. Amazon, for once, faces fierce and able competition.

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The balance of the major stocks in the Nasaq 100 are companies with mundane businesses, at least by the standards set for phenomenal growth. Among the largest of these are Comcast Corp. (CMCSA), Costco Wholesale Corp. (COST) and Netflix Inc. (NFLX). Each is a juggernaut in it own right. And each is besieged by other companies that want to and can get some of its business.

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