Stock market closes the books on a 'lost decade'

Los Angeles Times ^ | Jan 2, 2010 | Tom Petruno

[SeekAndFind]

The U.S. stock market today will close out its best year since 2003, an amazing comeback from what felt like Armageddon to many investors just nine months ago.

Yet today also ends by far the worst decade for stocks overall since World War II. At 10,548 on Wednesday, the Dow Jones industrial average was up 20% for the year -- but still 8% below its level at the end of 1999.

The last time the Dow failed to make any net progress in a decade was in the 1930s, when it sank 39% during the Great Depression.

Not surprisingly, Wall Street optimists see the market's last 10 years, and the gloom this "lost decade" has generated, as a better excuse to buy stocks than to sell.

Although acknowledging that the economy faces daunting challenges in the aftermath of the financial crisis, Jeremy Siegel, the Wharton School finance professor whose now-famous book, "Stocks for the Long Run," was published in 1994, says he remains a long-term bull.

"As Warren Buffett says, you should be fearful when everyone else is buying, and buying when everyone else is fearful," Siegel said.

Still, for many Americans who rode the market boom of the 1980s and 1990s -- and who came to trust the mantra of "buy and hold" -- going 10 years with no capital gain to show for it is hard to swallow.

The list of stocks still sharply below their levels at the end of 1999 includes some of the nation's most respected and widely owned companies. Shares of General Electric Co., for example, are at $15.35, down from $51.58 at the start of the decade. Wal-Mart Stores Inc. has fallen to $54.30 from $69.13 in the same period, while Microsoft Corp. has dived to $30.96 from $52.53.

[trumandogz]

We cannot afford another down decade for the Dow and even now the run up has been fueled by inflation and the Bail Out of the banks and Wall Street.

[seowulf]

Technically, the decade doesn’t end until the end of 2010, so there’s fleeting hope the decade (if that matters).

I’ve done decently buying dividend stocks for the last 10 years.

People were always worried that divvy’s weren’t as tax advantaged as capital gains, but when there’s no capital gain, there’s no advantage.

[packrat35]

You’re right but if they used 2000 as there basis, it would be much lower and included the begining of the drop during clinton’s term.

[WaterBoard]

Nope. The run up in the stock market has been from folks trying to get higher returns on their investment versus the 0.5% offered by savings account in banks.

Banks are basically getting free money at no interest from the government and charging borrowers 5% to 40% interest depending on the type of account.

Meanwhile, the interest they are paying for CD’s and savings accounts and Money Markets is averaging around 1%.

Banks are making a killing off the tax payers so folks are trying to get a higher return off of the stock market which has fueled the recent run up.

Unfortunately, this run up in the market is another dead cat bounce based on weak fundamentals, IMHO.

[contrarian]

I am at a total loss as to what to do with my 201K.... I am in cash right now but need to do something.. Anyone have any suggestions ??? I am researching all options but nothing very promising is showing up on the radar...

[headsonpikes]

The worst is long over in the current cycle. I’m up 115% YOY and over 150% since the early Dec08 lows in my portfolio.

I’m still long the Canadian junior miners and explorers - NGD and AUM on Toronto; MDL, OGR, and HAT on the Venture Exchange. There are numerous emerging lithium, rare earths and uranium explorers as well as the more familiar precious and base metals explorers and producers. There have been many multi-baggers already this last year - I’ve had a four-bagger and a couple of triples myself; plus some doubles - it certainly adds up LOL!

I can hardly wait for Monday! It looks like a sweet year coming in the metals.