|Detecting a tech bubble
||[Nov. 9th, 2009|12:28 pm]
The graph below compares the NASDAQ with the Dow over the last decade and a half. The tech bubble sticks out like a sore thumb, which makes sense since the NASDAQ is technology-dominated. On the other hand, the current recession affected both indices in exactly the same way, since it wasn't tech-related.
Back in 2007, the Richter Scales made a famous video which made the point that we were in another tech bubble that was about to pop. It was scary, and at the time I didn't know whether to believe it or not. But now I wonder if the NASDAQ — DJIA spread might be a simple and reasonably reliable indicator.
I'm not very knowledgeable about finance and the economy; any thoughts?