The Bursting of the Non-Bubble?

Friday morning's WSJ has a cover story comparing the declines in financial shares to the declines of tech stocks during the Internet bubble.  We find that comparison hard to make at this point. 

Since its peak last year, the S&P 500 Financial sector is down 45%.  While that's a large decline, it's nothing compared to the 77% decline that the Nasdaq saw from its high in 2000 to its low in 2002.  For the Financials to be 77% below their record highs, the sector would have to fall another 60% from current levels! 

And the rally in Tech stocks completely dwarfs the rally that Financials had.  In the first chart below, we highlight the percent change in the Nasdaq and the S&P 500 Financial sector since 1990.  As shown, the bubble and its subsequent burst in the Nasdaq stands out like a soar thumb. 

In the bottom chart, we highlight the percent change in the Nasdaq from its low made in June 1994 to its low made in October 2002.  We also include the Financial sector from its low made in October 2002 to its low made Thursday.  While it's been a tough ride for Financials recently, the Tech bubble was more than double the fun and then double the pain.

click to enlarge

Comments

[DonSuper:]

I had exactly the same thought when I read that wsj article...

2008 Jun 29 10:31 AM

[Tim Plaehn:]

Excellent comparison. Not to mention of how many of the "tech" companies were complete frauds, going public just to milk investors. Most financials are established companies that have made bad decisions.

2008 Jun 29 10:49 AM

[Diva:]

Good

2008 Jun 29 01:30 PM

[secmaven:]

The bursting of the tech bubble resulted in literally thousands of tech companies that had specialized in selling stock certificates going out of business. If a similar percentage of US financial institutions go out of business as the financial stock "bubble" bursts the US economy will have to go forward on a barter system.

2008 Jun 29 03:48 PM

[Jolly_Rancher:]

When you compare the risk associated with techs and financials, the financials are taking an even greater bloodbath. These are real companies with huge assets and earnings that have collapsed, and are a huge part of the long term GDP. I'd say this financial meltdown is worse that the tech meltdown and will have repercussions beyond tech's also. If the money guys can't make money, no one can.

2008 Jun 29 04:54 PM

[ArtfulDodger:]

So true. But so many banks aren't lending money and on top of that consumers aren't borrowing. So how will banks make any money over the coming years?

That should definitely be taken into consideration when discussing financials.

No matter though, because there is no hope in the long run to save our nation from its steady and definite decline, i.e, our nation as we've known it.

For as long as so many people want to keep leftists in power so that they can create more government to combat the problems and disasters that their government programs and legislation caused in the first place, we are eventually doomed economically.

And government bureaucrats do this over and over, but always wiggle out of what they've done by blaming private industry (Big Oil, Big Pharma, and the like, and of course a bogeyman such as Bush or Cheney or Rove), and the people for what they have brought about.

With the help of the Marxist media, the people then yell for the government to do even more, thus causing problems that will have to be faced in the future—and that means more government rules, regulation, and legislation that brainwashed parrots scream for.

And clearly, it doesn't help sending our forces around the world to carry out other nation's wars for them. You can't blame Bush for all of this either. The Dumborats in Congress voted to go get the Toy Tiger in Iraq (except for the members of the Black Caucus, which only votes for bills to punish American businesses and individuals); and Bush didn't put troops and bases in over 140 nations around the world. They were there when he took office.

Meanwhile, America has an invasion from the south, crashing stock markets and the dollar, along with hyper-inflation, declining property values, exploding crime (see Sean Hannity's America from Sunday, June 22, `08), and energy and food prices nearly equalling Germany's in the 1920s.

Enjoy the ride, especially those of you who're calling for even more leftists to take over so they can create more government to punish businesses and anyone else who is succeeding in the private sector.

Parasites engender more parasites of different types, because when one begins its feeding, it weakens the host, which invites even more suckers to the party. The host soon withers to nothing. Consider the American people the host.

2008 Jun 29 05:01 PM

[Kunst:]

The problem with the financials is that they are leveraged all to heck and gone. When you "own" 20-30 times as much as your real assets, it's easy to go bankrupt when the bubble pops.

2008 Jun 29 07:16 PM

[Partly Sunny:]

If the graph compared tech stocks with housing prices the bubbles may look more alike.

2008 Jun 29 10:18 PM