Nasdaq: This time, it's different

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Stock market indexes constantly evolve as members come and go, but the Nasdaq composite index is something very different today than it was in 1999, as the Wall Street Journal pointed out. The comparison arises because the Nasdaq recently touched 3,000 – yes, a meaningless round number at one level, but one that naturally draws one's attention to the dot-com bubble, which is the last time the tech-heavy index rose above 3,000.

And this comparison flatters today's version of the index because it is now much more grounded in actual earnings and dividends, rather than pie-in-the-sky promises about making billions of dollars by selling pet food online.

Barry Ritholtz has a nice summary of the Journal's article, highlighting some of the key differences: Today's biggest 100 technology companies in the Nasdaq are awash in cash, 43 per cent of them pay dividends, their earnings multiples are 23 (versus 78 in 1999) and they tend raise money through the bond market. As the Journal notes, the biggest technology companies in the Nasdaq are starting to look a lot like the members of the staid Dow Jones industrial average – in a good way.

These are interesting points to make as indexes continue to rebound from the bear market low of 2009. The Dow recently touched 13,000, marking its highest level since 2008, leading to natural questions about how far this rebound can go. That's because the Dow is pretty much the same index it was several years ago, apart from several membership shifts in recent years.

But with the Nasdaq looking fundamentally different – with companies much more grounded in sales and earnings and cash distributions – the index could provide one of the few cases where the phrase "this time, it's different" actually rings true.