Dow and Then: 1999 vs. 2009

By David Berman

Peter Boockvar, writing on the Big Picture , has a nice piece comparing various asset prices and financial benchmarks during the Dow Jones industrial average’s first rise above 10,000 (in March 1999) and today.

Here’s a snapshot of his findings (minus his comparison of hit tunes and Academy Award winning films). The theme that emerges is that this is not a repeat move of 10 years ago.

Gold in 1999: $280 (U.S.) an ounce. Today: $1065.

Oil in 1999: $16.44 a barrel. Today: $74.80.

Copper in 1999: 62 cents. Today: $2.83.

Yield on 10-year Treasury bond in 1999: 5.19%. Today: 3.38%.

Fed funds rate in 1999: 4.75%. Today: 0%.

What’s also surprising is just how many Dow components are well off their levels from March 1999. And that’s after ignoring debacles like General Motors Corp.

Here are a few examples.

Microsoft Corp. (MSFT) in 1999: $34. Today: $25.85.

Citigroup Inc. (C) in 1999: $30. Today $4.94.

General Electric Co. (GE) in 1999: $37. Today: $16.80.

Comments

[User 500108:]

Try charting the SPY against the UDN or the FXE.

It is clear from this that prior to the crash, the SP500 was worth relatively more with respect to the USD and the Euro. After the crash the value of the SP500 fell well below the value of these currencies in relative terms. It is only now starting to catch up in relative terms with still lots of headroorm in terms of its value against these currencies.

Oct 14 05:03 PM

[manya05:]

Well, I do not know what conclusion you are trying to teach us, but here is mine. If the Dow was 10,000 then, and it is 10,000 today, then as an index, the Dow is not worth the electronic billboard it is printed on.

Oct 14 05:32 PM

[CatsJam:]

Great, so basically we've made no money in the stock market but the price of everything else has gone up. However, interest rates are super low so you can add more to your debt pile (if you qualify). I love this country!

Oct 14 06:01 PM

[gabe borens...:]

The 1999 rally was reflection of insane evaluations and expectations of the high tech sector. When the reality caught on ,the markets have imploded. The preceding monetary tightening only exacerbated the issue .The current rally is a reflection of unprecedented commitment by the FED ,the Congress and the Administrations(both) to deflect a major economic decompression in any sector. The combination of the global "market" bears which have failed to read the danger signs which were visible as early as 2005,continue to spew the bearish nonsense which does not address the current programs(bullish) in place. The U.S recovery is in the early cyclical stages and will continue to gain momentum in the period ahead.
The price of gold is a reflection of the medieval perceptions by some of the market gurus who will be proven wrong in the period ahead.

Oct 14 06:27 PM

[David Van K...:]

Interesting stuff. But really, you are just comparing the prices of two different things, one at a time: Dow vs. copper, Dow vs. gold, etc. You could as well compare guns vs. butter, ham vs. eggs, peas vs. carrots. I'm not sure you wouldn't see similar discrepancies.

One near-constant in the relationships is that the Dow has meandered back to its 1999 level, while the other things mentioned are all 4x-5x more than in 1999. Isn't the obvious conclusion that the Dow was waaay overvalued in 1999? Actually, we know that this is true, because 1999 was the last year of the tech-telecom-Internet bubble.

Oct 14 08:04 PM

[ArtfulDodger:]

I suppose you could take an optimistic view and say this comparison means the DOW is undervalued today.

So there is about as much value in this comparison as comparing the Crash last year with the Crash in 1929. Two different countries; two different economies.

Oct 14 09:21 PM

[robert.b.fe...:]

Play the market you have. Traveling stops got me long in cash and allowed me to buy on the way down. BofA (BAC) got back in the green today. I had been buying up Country Wide Financial before the it's acquisition by BofA. While this paid a premium at the time the stock went lower than I thought and has just today reached profitability again. Citti (C) may not recover for five years but I am patient I misjudged how far it would fall as well. The point is that money can be made in almost any market unless the rules get changed. That is my concern today. What changes are coming? I believe that they are coming I'm just not sure they will be for the better. Bond holders at Government Motors Didn't think so.

Oct 14 10:57 PM

[doubleguns:]

Like comparing silver to it's high of $50 bucks during the hunt brother days. It makes no sense with out some reasoning to go with it.

Oct 14 11:47 PM

[Mark Divy:]

My investment portfolio has increased by over 14x from additional cash and investment income during the period from 1999 to 2009 (not very remarkable, but to prove a point). It is not what the Dow says, it only matters what you buy, when you sale, and why.

Oct 15 08:28 AM