A Year After Market Hit 12-year Low

CBS' Jill Schlesinger on the 12-Month Recovery, and What Investors Should Do Looking Ahead

(CBS)  What a difference a year makes.

On March 9, 2009, the stock market plunged to a 12-year closing low: 6,547. Slowly but surely, we are digging ourselves out.

With Wall Street closing yesterday at 10,552, CBSMoneywatch.com editor-at-large Jill Schlesinger said the Dow Jones Industrial Average is up over 61% over the past year.

"That is the best one-year since the Depression, the best 12 months," she said on CBS' "The Early Show" this morning, also noting that the Nasdaq is up 83%, and Standard & Poors is up 68%.

"I really want to point out one thing that's a little scary: The S&P 500 is still at the same level as 1998 - we still are 27% below where we were in 2007," Schlesinger said. "So we've made a lot of ground up, but still got a ways to go."

Schlesinger said the sectors which recovered most in the last year were business services (publishing, advertising, consulting) up +210%; media business ("thankfully for us!") up 138%; and a 155% jump in financial services - "all those taxpayer-bailed out companies, the banks, the mutual fund companies, the big insurance companies," she said. "To me that's pretty amazing."

But she acknowledged that with that gain came pain, on the backs of taxpayers.

"So it sort of stinks on one hand, but we're happy a year later that things have stabilized," she said."

Schlesinger also said the numbers bode well for the recovery of 401(k)s. According to figures provided by Fidelity, at the end of March 2009, the average 401(k) balance was $47,000; at the end of December 2009, the average was $64,000.

"Part of that has to do with us putting more money in, but that's also a sign of confidence," she said. "Part of it was market growth. Those are really good numbers. We're happy to see that trend."

Schlesinger's advice for the next year?

"Number one, look at the last year. Don't get emotional. It's never as good, or as bad, as you think it's going to be.

"And one way to guard against your emotions and not fall prey to fear, or to greed, is to take a risk assessment questionnaire. Go to your 401(k) plan provider, any mutual fund company, you take a test. It says 'How did you feel' at the bottom. 'How are you feeling now? When do you need your money?' Those questions help you create a diversified portfolio.

"You know the broken record: Everyone comes on and says, 'Diversified portfolio.' This works. By the way, in the decade of 2000 to 2009, a diversified portfolio, stocks and bonds, beat all stocks.

"So don't be a hero: Get a good night's sleep, don't panic, don't fall prey to your emotions, chill out."


For more info:
Read Jill Schlesinger's blog, The Financial Decoder, at CBSMoneywatch.com.

[curse914]

by curse914 March 9, 2010 1:18 PM EST

It is amusing that supposedly intelligent people think that perpetual growth is possible, period. An economy predicated on this concept is a farce.

Not only was Milton Friedman and Ayn Rand wrong about the benevolence of an unfettered Market, their economic cult is founded on the fallacy of perpetual growth within the confines of a finite planet. So not only are we all obligated to think that it is human nature to "do the right thing" we are supposed to suspend disbelief and fill a glass with "more water that it can hold."

==========================

by 12Profit March 9, 2010 3:18 PM EST

Perpetual would be nice but, growth is dependant on the ability to discover new technology and create new product life cycles. You see where our educational system is in the news. This is a long term investment and how long will they wait until they start funding,is anyones guess.

[][][][][][][][][][][][]

Perpetual growth is not possible with the confines of a finite space. Any other interpretation of "finite" is dangerous mythos worship; most likely attributable to wishful thinking or short term financial gain (self interest).

"Technology" can only defer the problem of glass size so long and by extension education can only mitigate the problem for so long. Eventually we either adapt gracefully with this reality acknowledged or we allow my metaphorical glass to break and hope that we can put the pieces back together. The later scenario requires vast sums of arrogance in conjunction with ignorance.

[Turbidite]

Invest in yourselves folks. That way you know where your money is going. Never let another person control your wealth, unless it is in an FDIC guaranteed deposit.

[retiredgustav]

At 1% it will take for ever. Twenty years ago I received $6000 from a company I worked for. I nvested that money and even with the downturns that block om money is worth $42,000. If I had taken the same amot of money and put it in a 2% CD guaranteed of course that money would be worth abot $8800. Even with its ups and down give me the stock market any day or night

[curse914]

retiredgustav, if that money deflates at the wrong time (retirement) then the CD may look real appealing.

I am not sure what makes these guys think the stock market is ever going to recover. We have none of the funtimentals in place that created the single wage earner of the 1950-60's. And this is after completely ignoring the fact that our continent is not going to grow exponentially to accomodate the Stock Market.

[12Profit]

Stocks rise in value when earnings per share goes up quarter over guarter.

The financial instutions got some 700 billion dollars at 5% return that is 35 billion dollars that increased earnings per share.

A corporation lays off 1 person that earns 50,000.00 per year x 2 to include the labor burden (payroll taxes, vacation pay, worker's comp, etc..) that was no longer required to pay. Now multiple the savings for laying off 1 person x 1,000 people and this equates to $100,000,000.00 increase in net profit which increase the earnings per share.

The problem is in the next quarter how do they intend to increase earnings per share quarter over quarter they will not receive the same effect from these two issue the next quarter. Therefore, what happened this last quarter will not provide the same benefit in the next. Keep your money safe, use a wait and see approach or play short positions for those corporations that have had an increase in stock price due to the above factors.

[curse914]

It is amusing that supposedly intelligent people think that perpetual growth is possible, period. An economy predicated on this concept is a farce.

Not only was Milton Friedman and Ayn Rand wrong about the benevolence of an unfettered Market, their economic cult is built on the fallacy of perpetual growth within the confines of a finite planet. So not only are we all obligated to think that it is human nature to "do the right thing" we are supposed to suspend disbelief and fill a glass with "more water that it can hold."

[12Profit]

Perpetual would be nice but, growth is dependant on the ability to discover new technology and create new product life cycles. You see where our educational system is in the news. This is a long term investment and how long will they wait until they start funding,is anyones guess.

[sean66x]

Debt-Equity finance ratio is a national and international banking issue. America is deeply in debt and shows mediocre equity. Obama should wisely declare the U.S. as insolvent. Why take risks with cheap, dangerous imports?

[berlinfoto-2009]

The market is up in dollar units, since a year ago, now here is a question that might put things in proper perspective. How many dollars did it take to purchase a ounce of gold a year ago, compared to how many dollars does it take to purchase a ounce of gold today?
I do not know the answer, I really have not looked for gold values, of last year, or today.
What I am truly asking is the market really up? or is the dollar really down?
My best guess it is some of both but more or the latter.
The behavior modified society is coming soon, the New World order and the microchip.
Put on your blinders and do not ask questions, place your life in their mercy and hope that you do not stand out. For it you are to smart, or to dumb, to ugly, or even to beautiful, it may be your death warrant. The little people working to bring all of this about are like sonder kommandos and working to bring this about, will be their death warrant.

[curse914]

Just look at where the growth was...in the friggin financial sector. That does nothing for Main Street nor has it proven to be sustainable (read our recent financial collapse).

Take note that no regulations have been put back in place. Glass Stegal which was put in place after the Depression to keep these financial institutions from bilking the citizens out of their hard earned dollars with financial instruments is gone, I guess for good, until the Empire collapses.

[skyk-2009]

I KNOW!! Hey everyone lets all get together and give Trickle Down another try. Sure it didn't slow down the Spiral into a Depression and sure it has NEVER operated the nation in the Black but how else can an Incompetent Bigoted pack of LOSERS gain power??