Worst Year Ever for Stocks: 'Irrational Exuberance' of 1990s Being Unwound-Yahoo Finance

[Tierra_y_Libertad]

http://finance.yahoo.com/tech-ticker/article/133019/Worst-Year-Ever-for-Stocks-%27Irrational-Exuberance%27-of-1990s-Being-Unwound?tickers=C,AA,AAPL,DUK,^DJI,^GSPC,SPY

Any way you slice it, the 2008 is shaping up to annus horribilis for the U.S. stock market. Heading into Friday's session, in which an early rally effort quickly faded, the S&P was down 49% year-to-date and on track for its worst year ever. Down 43% year to date, the Dow is heading for its second worst year in history, the WSJ reports, trailing only the 53% decline in 1931.

While the major averages tell a grim tale, the action in components of the S&P 500 speak to the extent of the devastation. Heading into Friday's session:

* 115 S&P stocks were trading under $10
* 41 were trading under $5
* 204 were trading with a market cap of less than $4 billion

These are not the only criteria used for inclusion in the index, but S&P 500 companies typically have market caps above $4 billion and stock prices above $5. Furthermore, many institutional fund managers are prohibited from owning stocks that trade below $10 or $5, depending on the firm.

In other words, a lot of companies currently in the S&P 500 may not be eligible for membership or, more importantly, ownership by major institutions. That, in turns, may mean more selling ahead, even though stocks are "cheap" based on a variety of metrics. For example, 163 stocks in the S&P 500 are trading below book value, or assets minus liabilities, including non-financials like Alcoa and Duke Energy.

[phantom power]

1. If the Dow drops to 5000, that's about the start of the 90s tech bubble.

[lapfog_1]

2. And with all the retail chains and malls closing up shop...

It sure is a good thing that we have the "new economy" and the "long boom" promised in the early days of the dotcom era!

:sarcasm:

[closeupready]

3. Oh, yes - "recessions are history", as I recall.

:rofl:

[phantom power]

4. Dow 36000!

I keep thinking that when I saw that book come out, I should have started my bunker the next day.

Oh well, I was young.

[lapfog_1]

5. I like to tell a story (which is true).

In 1999 and 2000 I founded my own high tech company (to do something called continuous backup (with something else I invented, de-duplication, though that wasn't my term for it).

Anyway, as I made the rounds of the Sand Hill road VC firms, one of them gave me a business plan for a recently funded startup. It was selling women's makeup online. They had a former executive from Revlon and a bunch of other cosmetics people involved, but no technology or innovative ideas. I don't buy makeup, but I started asking all of the women I knew if they would buy makeup online (girlfriend, sister, my mom, friends). Universally the response I got back was "no, not unless I'm reordering something that I use all the time, and even then I like going to the cosmetics counter and seeing what else they have and how it looks on my skin" (almost verbatim from every person in my informal poll).

That company got $50M in first round VC money.

I told all my friends to sell all of their dotcom stocks.