I had a "What the heck?" moment the other day when I was watching TV and someone said we've been in a bull market for three years so it's time to take a break and maybe see a bear market for awhile.
Umm, the market is flat since December 1998.
That's right. Almost seven years ago, the S&P 500 closed at 1195, right where it closed on Wednesday. Ever since then, we've been watching CNBC on our treadmills, moving nowhere.
This fact implies that everything we were hoping for back in December 1998 has failed to come to pass. Back then, everyone figured the rise in the Internet would increase productivity, create new companies, move retail online, and so on. So what happened? Well, the Internet has more than delivered on its promise, and that is why I am bullish on the sector here.On Dec. 21, 1998, the day the S&P first cruised past 1200, Aaron Task wrote an article titled "Passion to Own Stocks Burns Brightly On." The passion didn't last, but perhaps it should have. Because all of the hopes and dreams back then were related to the Internet, let's take a look at where the Internet was and where it is now: In 1998, there were 147 million Internet users, and there are now 957 million users, a modest 600% increase in about seven years. (So it is short of 100% annual growth.)
The Net gets its earnings machine in gear.
|Top sites in October 1998||Operating Income Q4 1998||Top sites October 2005||Operating Income Q2 2005|
|msn.com||(Not broken out, assuming 0)||passport.net||N/A|
|* Total Earnings||($24mm)||* Total Earnings||$1.28bb|
|* Total Earnings for 1998 and 2005 exclude Microsoft.com.
1998 Figures: Media Metrix
2005 Figures: Alexa
Research: Formula Capital