Stock Losses in Oughts as Bad as in 1930s Depression

Posted by: David Henry on June 22

There are still six months left in this decade, but it is not too soon to start drafting its obituary. Howard Silverblatt, senior index analyst at Standard & Poor’s, is already looking at the decade’s stock market legacy. It’s ugly. The S&P 500 is down 39.22% from Dec. 31, 1999 through Monday’s close.

“We need a 63.79% advance just to break-even for the decade,” Silverblatt says. That’s not going to happen by Dec. 31. “The last negative decade was the 1930s, -41.77%,” according to Silverblatt. Annualized, stocks lost 5.12% so far this decade; in the 1930s decade of the Great Depression they lost 5.26%.

When this decade started, the talk was about sure-thing tech stocks and worries that the Y2K software bug would set the world back to 1900. The computer clocks entered the new millennium. The tech stocks broke down within 90 days.

Some people said we should call this decade the oughts, for the two zeroes. The term didn’t catch on. Looking back, it is clear that the real oughts of the 2000s were that we ought not to have paid so much for internet stocks and that we ought not to have paid so much for big houses with granite counter-tops.

Now we know that it was a lot easier, and cheaper, to fix the Y2K bug before a calamity than to fix the stock, housing and credit markets after. To our regret, we were more skeptical of computer programs than the “efficient” markets we wanted to make us rich. Nerds win. Pigs lose.

Reader Comments

joe

June 22, 2009 09:46 PM

The worst yet to come!

jeremy

June 22, 2009 10:15 PM

thanks for all the good info

jeremy

June 22, 2009 10:17 PM

you guys some the whole world up in just a few pages keep it up i enjoy reading this

Christopher Holland

June 22, 2009 10:18 PM

Not sure about the reference to the Y2K bug - I reckon it was the biggest scam of all time, only now being overtaken by the climate change propagandists. They make Joseph Goebels look like stage frightened amateur. It does not surprise me that the people who fell for the Y2K nonsense and now climate change mythology turned out to be lousy managers who lost money for the whole decade. The first requirement for successful management is to have good judgment and people that gullible do not meet this condition and never will. Start worrying about the next decade, it will probably be even worse.

hock

June 22, 2009 11:45 PM

This decade poor stock performance confirms that loose monetary policies that create bubbles though fun in the short-term does not benefit in the longer-term. There is no short-cut to actual wealth creation. So far the biggest beneficaries are fat-cat bankers from Wall Street at the expense of sister Susie and brother John.

David Henry, BusinessWeek

June 23, 2009 10:31 AM

I dropped Howard Silverblatt a note to say thanks again for providing the stock loss stats that kicked off this post about the decade of the oughts.
He wrote back to advance the discussion (and the use of Roman numerals)with this:

"At Y2K we were worried that the ATM wouldn't work because there was no power

For Y2KX we are worried that there will be no money in the ATM

And for Y2KXV we are worried that we won't have the medical coverage to cover our back problems from pushing around the wheel barrel of money we'll need after inflation starts."

Thanks again.


Doug

June 23, 2009 04:00 PM


I agree. (Thank you Federal Reserve Board and in particular Greenspan.)

Doug

June 23, 2009 05:46 PM

In the long term, wealth creation does not come from easy monetary policies.

Don

June 23, 2009 05:53 PM

Please note that those losses all occurred AFTER it became apparent that BO could win nomination and election.

williambanzai7

June 23, 2009 05:53 PM

And ought not to have trusted the quantitative fantasies manufactured in the halls of Wall Street and MIT.

Sindy

June 24, 2009 07:27 AM

It's about the Economic Crisis...

wowlfie

June 24, 2009 07:58 AM

That's what I keep saying over and over stocks are a crap shoot and only the lucky profit from it. It's no different than 'educated' gambling at best. Then too this recession is basically on par with the Great Depression and it's not over yet. The recent upswing is just a market bounce and it will begin going down later this year to collapse tremendously next fall despite 'so called experts' predictions of a recession ending later this year. Total BS.

Kartik

June 24, 2009 07:33 PM

Emerging markets stocks did well this decade. Check out India, China, and Brazil ETFs this decade. Check out the EEM ETF.

tom

June 25, 2009 03:27 PM

Does the 5.12% loss include dividends?

David Henry, BusinessWeek

June 25, 2009 06:15 PM

That's a good question about the dividends, Tom.
Counting dividends, the annualized return, or loss, for the 00s is - 3.32%, according to Howard Silverblatt. In the 1930s, dividends turned the annualized 5.26% price decline into a return of 0.97%.

That's another reminder that dividends were always important in the stocks for the long run argument. Too bad so much of the corporate cash that used to go for paying dividends was diverted to buying back stock to offset dilution from management stock options.

Thank you for your interest. This blog is no longer active.

 

About

BusinessWeek's Adrienne Carter, Jessica Silver-Greenberg, and David Henry deconstruct the mysteries of high finance, Wall Street, and hedge funds for pros and ordinary investors. E-mail them directly if you've got tips about big deals, a hedge fund, or even securities industry gossip.

BW Mall - Sponsored Links

Buy a link now!