This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

With S&P, You Get What You Pay For

Editor's Note: This is a bonus story from Jon D. Markman, whose commentary usually appears only on RealMoney. We're offering it today to TheStreet.com readers. This column appeared March 10 on RealMoney. To read Markman's commentary regularly, please click here for information about a free trial to RealMoney.


In your file labeled "Disingenuous Press Releases," please place the one published Wednesday by the equity index team at Standard & Poor's titled "75% of Non-Technology Issues Recover From Post-March 2000 Crash."

The purpose of the release, it seems, was to blame technology stocks for ruining the performance of the S&P 500 Index over the past five years. And yet it was not clearly disclosed that Standard & Poor's willfully and ruinously stuffed its flagship index full of technology stocks in that fateful year, much to the detriment of millions of investors.

How badly have the tech stocks of the S&P 500 done? According to the press release, only 11 of the 78 tech stocks in the benchmark index are higher today than March 24, 2000, the day the S&P 500 hit its all-time peak. In contrast, 304 of the 404 nontechnology stocks in the index are higher today. That is, 14% of tech stocks are higher, whereas 75% of the rest of the nontechs are higher.

The implication is that the S&P 500 -- on which more than $1 trillion in investment funds ride, due to the misguided indexing craze -- would be a lot higher, doggone it, if not for those pesky techs. Howard Silverblatt, equity analyst at S&P, notes in the release that tech stocks in the index would have to gain 209% from today to get back to 2000 prices. He adds: "On average, most issues within the S&P 500 have recovered. ... The enormous losses of high-cap technology issues have weighed down the market, resulting in a 20% loss."

So whose fault is that, exactly? You won't learn this from its release, but the raw truth is that S&P added two dozen technology stocks to its big-cap index in 2000 -- the most it has ever added in its long history. Most of these were put in the index not to replace companies that had been merged out of existence or were in danger of going bankrupt, but rather because index managers feared losing relevance to the then-soaring Nasdaq 100 (NDX).

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,943.81 +28.74 0.17%
S&P 500 1,967.57 +2.89 0.15%
NASDAQ 4,415.49 +19.2860 0.44%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs