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$11 Trillion Wipeout: Wall Street's Year-and-a-Half of Dangerous Living

Posted Mar 06, 2009 05:03pm EST by Aaron Task in Investing, Recession, Banking
Related: ^dji, ^gspc, GM, C, AIG, XLF, QQQQ
In a fitting end to another desultory week on Wall Street, the stock market did its best to frustrate everyone Friday; first, it failed to sustain an early bounce on not-worse-than-feared jobs numbers, then avoided the cathartic "whoosh" down many were hoping for after the initial rally faded.

After trading as low as 6470, the Dow rebounded to end the day up 32.50 points to 6470. The S&P also managed to eek out a gain to 683 after trading below 667 intraday while the Nasdaq pared much of its early loss before closing down a hair at 1294.

It's hard to remember what transpired in just the past week, during which the Dow and S&P hit their lowest levels since 1997 and 1996, respectively. But it's almost impossible for most of us to remember (much less comprehend) what's occurred in the past year, or since the peak in October 2007.

So here's some (unfriendly) reminders:

  • The current decline is worse than the 1929-1932 rout.
  • Based on the Wilshire 5000 Index, the market-cap of U.S. stocks is down $11 trillion since the Oct. 2007 peak, Marketwatch says.
  • U.S. stocks have lost $1.6 trillion in market-cap since Barack Obama's inauguration, Bloomberg reports.
  • Nearly 50% of all stocks in the Wilshire 5000, the broadest index of U.S. equities, are trading for less than $5 per share, and 37% are under $3.

As devastating as those statistics are, they fail to capture the psychological damage that's been done by the fall of once hallowed institutions such as Bear Stearns, Lehman Brothers, Merrill Lynch, AIG, Fannie Mae and Freddie Mac, as well as those still hanging by a thread like Citigroup and GM.

Still, there's a case to be made that stocks are now actually "cheap" on a long-term cyclically adjusted P/E basis. Yes, it's probably is too late to dump and run, and the market is certainly due for a short-term rally of some substance. But that doesn't mean major averages aren't ultimately going still lower before the worst bear market of many generations runs it course.

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