No Value Added In 8 Years?

While many are taking the opportunity to look at what has transpired since the Lehman's collapse a year ago, the folks at Bespoke Investment Group put up a more pertinent piece on the Dow Jones Index component stocks. Eight years have now passed since 9/11, and the Dow is essentially unchanged since that horrible, sad day. On 9/11/01, the Dow was at 9,605. The index is currently trading just 15 points below that level at 9,590. That literally meant that in 8 years, no value has been added by these component stocks (minus dividends paid out). Of course a more plausible explanation would be mispricing. That means 8 years ago the markets were too expensive and now they are not, or 8 years ago the markets were fairly valued and now it is grossly undervalued - which hypothesis is 'more correct' has a lot of bearing on how you view the state of markets and the potential value and upside or downside. I tend to believe that the latter view is more correct, i.e. the current market values brings about more "value and opportunity" going forward.

Bespoke - The stocks that made up the index that day have had big moves, however. Hewlett Packard (HPQ) is up the most with a gain of 157%, while General Motors is bankrupt. Caterpillar (CAT), McDonald's (MCD), United Technologies (UTX), Exxon Mobil (XOM), and Procter & Gamble (PG) are all up more than 50%, while Alcoa (AA), General Electric (GE), Eastman Kodak (EK), and Citigroup (C) are all down more than 50%. Coca-Cola (KO) and Microsoft (MSFT) are currently trading the closest to where they were on 9/11/01.

p/s photos: Eva Huang Sheng Yi