NASDAQ storefront just for show

By DAVID MOON, Moon Capital Management
March 13, 2003

I was in New York last week and found myself with a few free hours to be a tourist. I walked to Times Square, where lighted signs and huge video screens seem to reach almost as high as the eye can see. If you ever doubt there is a war being waged for control of your mind and actions (and not incidentally, your wallet), just consider all of the money companies spend to broadcast their presence in Times Square. If these messages and images were not effective, companies would not spend millions of dollars to put them there. It is the heart of America's commercialism.

Since Times Square is also the heart of New York's theater district, it's appropriate to note that the glitter and lights of the area are also all a show. The NASDAQ Marketsite at the corner of 43rd and Broadway proves the point.

Few people questioned why the NASDAQ opened a high profile storefront location in Times Square a few years ago. (The timing of this opening ' at the heights of technology stock popularity ' was not a coincidence.) After all, when CNBC reporters wanted to talk about big price movements in stocks like Wal-Mart, Ford or Home Depot, cameras broadcast those reports live from the floor of the New York Stock Exchange. The NASDAQ is home to many large companies, most notably among them, Microsoft. But it is dominated by smaller, less well-known companies. As a computer clearing system, the NASDAQ has no physical trading floor; its beauty is in its lack of a physical presence.

Several years ago, the NASDAQ decided it needed a location where reporters could stand in front of something when they talked about NASDAQ stocks. So they opened their high profile Marketsite in Times Square. When you see Liz Clayman each morning on CNBC's Wake-Up Call, the show is broadcast from the NASDAQ Marketsite. All day, reporters stand in front of brightly lit flashing blue panels, ticking off each trade of a NASDAQ stock; you get a sense they are in the middle of some sort of technological equivalent of the New York Stock Exchange floor. They are not. They are standing in what amounts to a very small television studio. There is enough space in this room for a couple of cameras, a few cables and a couple of chairs. That's it. I was shocked by how small the space is. I know the NASDAQ Marketsite is just a fa'ade and no trading is actually conducted or even recorded there. But it seems to me that there would be a bit more substance to what appears to be such a high-profile location when viewed on television. The next time any television-show camera pans across Times Square, look at the huge NASDAQ sign. It is seven stories high, flashing news and stock prices visible from blocks away. But underneath that sign, located in a corner sidewalk front location no larger than a very, very small convenient store, is what appears on television to be a substantial physical plant for the NASDAQ.

Like many of the stocks traded on the NASDAQ, its luster is merely an illusion.

This past week also noted the third anniversary of the peak of the NASDAQ. Since March 2000, the collective prices of the NASDAQ stocks have fallen 75 percent. Like the Time Square location designed to create an excitement and interest to rival the more established New York Stock Exchange, most of those stock prices were an illusion. They weren't real. If you merely glanced at the lights and glitter, those stocks may have appeared substantial and attractive. But like the NASDAQ Marketsite, there was very little substance underneath the flash.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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