A Perspective on Post New Economy Business Cycle Behavior by Joseph Calandro (University of Connecticut)
"By mid-to-late 2001 the NASDAQ Index retraced virtually all of the gains it had achieved during the "new economy" boom. For many market participants that market behavior signaled the end of business cycle activity in the U.S. economy. We apply Austrian Business Cycle Theory to post-new economy market behavior and show how, via expansion of the money supply as measured by M3 and expansion of the national debt, business cycle activity is continuing in the U.S. economy, albeit in a different form. This position is illustrated in an examination of the price behavior of the NASDAQ Index, real estate market, oil market, and gold market. Subsequent to this discussion it is shown how to integrate business cycle analysis with value-based indicators such as low dividend yields and low price-to-earnings ratios to enhance traditional forms of investment analysis. Note that this is not a paper on investment technique; rather, it explains and demonstrates a practical application of business cycle theory."