One year ago all seemed right in the world. The Nasdaq was on fire and the mutual funds were red-hot. A year later, $2.2 trillion of NDX, or the Nasdaq 100 index, has been vaporized. Vanished. Like it never existed.
Take a look at the chart below (I know it's huge, but just take a quick look). Look at these losses. Now consider that, according to the SIA, 49 million homes own stock. That's a powerful amount of loss to inflict on the public. Of course, we don't know how the losses are concentrated. We can't just say each household lost $44,969, which would be the loss divided by the households. Nor can we say, well, that will be made up by the $1.6 trillion tax cut (that would be $32,520 per household if only stock-owning households got cut). (Editor's note: Be sure to keep reading; there is more text and data beyond the chart!)
Market Cap Loss in the NDX since March 1, 2000 (**All Data from Bloomberg)
This table is a graphic depiction of the wealth effect in reverse. It is extremely sobering and an arrow in the quiver of anyone arguing that the Fed has its work cut out for it. I am presenting this chart after the
split-unadjusted table
(showing that "cheap" tech stocks are hardly that) because I don't want people to reach the inappropriate conclusion that the market has bottomed.
But I can't avoid the following conclusion: We must be getting down there. (The second table, below, is meant to give readers some perspective about how far in the hole we are right now.) Tech shrinks as a part of the S&P 500 every day. It is probably down to under 19% now. When it gets to 15% we will have some sort of bottom. Here's the problem with this sort of analysis, though. In my research of other manias that have gotten deflated, I never found one that got re-inflated right back after it bottomed. It just kept drifting and drifting and drifting. For a long time.
Time is money. You won't make money waiting. And you don't know how long you will have to wait. At least, though, accept that the carnage -- while great -- is probably not over. There are still tons of companies that are valued at more than $10 billion, something that I find inconceivable given the low earnings supporting those valuations.
Here Is Some Perspective: $2,21 trillion has been lost since March 1, 2000 in the NDX.
According to the BEA (U.S. Dept of Commerce Bureau of Economic Analysis) all of the CONSUMER DURABLE GOODS in the U.S. in 1995 equaled $2.18 trillion (including furniture, fixtures, computers and even software)!
According to the BEA (U.S. Dept. of Commerce Bureau of Economic Analysis) the GDP in the following industries in current dollars in 1999 were:
Agriculture, Forestry and Fishing
125.00 Billion
17.70
times more was lost in the NDX this year than this industry's GDP all year in 1999.
Manufacturing
1.50 Trillion
1.47
times more was lost in the NDX this year than this industry's GDP all year in 1999.
Finance, Insurance and Real Estate
1.79 Trillion
1.23
times more was lost in the NDX this year than this industry's GDP all year in 1999.
Motion Pictures
29.80 Billion
74.24
times more was lost in the NDX this year than this industry's GDP all year in 1999.
According to the U.S. Census Bureau (1990 Census) there are 91.95 million households in the U.S. The $2.21 trillion lost equals ($24,062) LOST per household A $1.6 trillion tax cut is equivalent to a $17,401 surplus per household. Assuming this tax cut, the net loss per Household (only counting the loss in the Nasdaq 100) is ($6,661).
Net Sales of McDonald's in 2000 were
14.24 billion
which means McDonalds would have to sell hamburgers for
155
years at this rate to equal the loss.
Net Sales of Cisco in 2000 were
18.92 Billion
which means Cisco would have to sell routers for
117
years at this rate to equal the loss.
Net Sales of Home Depot in 2000 were
45.73 Billion
which means Home Depot would have to sell lumber and tools for
48
years at this rate to equal the loss.
Net Sales of Microsoft in the last year were
22.95 Billion
which means Microsoft would have to sell Windows for
96
years at this rate to equal the loss.
Net Sales of Yahoo! in 2000 were
1.11 Billion
which means Yahoo! would have to sell advertisements for
1993
years at this rate to equal the loss.
James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. While he cannot provide investment advice or recommendations, he invites you to send comments on his column to jjcletters@thestreet.com.
Wrong! Dispatches from the Front The Looming Threat of Deflation 2/28/01 8:44 AM ET Contrary to popular opinion, inflation should not be a concern right now.
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