The Lost decade?

Chris,

Your clip from Mr. Yardeni's newsletter pointing out the S&P 500's sorry performance over the past ten years reminded me of Warren Buffett's celebrated article on the stock market in Fortune Magazine in late 1999, just before the internet stock bubble burst. In it, Mr. Buffett discussed very long periods of stock market activity using the Dow Jones Industrial Average as his point of reference. I went back to the article and retrieved some calculations Mr. Buffett made, updating them to today. They make for some interesting reading:

DOW JONES INDUSTRIAL AVERAGE (17 YEARS)

Dec. 31, 1964: 874.12

Dec. 31, 1981: 875.00

DOW JONES INDUSTRIAL AVERAGE (18 YEARS)

Dec. 31, 1981: 875.00

Dec. 31, 1999: 11,497.12

A gain of less than a point between 1964 and 1981 versus a gain of 10622.12 points between 1981 and 1999---quite a difference. And now? In the nearly nine years since December 31, 1999, the Dow has gained just 2.06%:

DOW JONES INDUSTRIAL AVERAGE (8+ YEARS)

Dec. 31, 1999: 11,497.12

August 8, 2008: 11,734.32

Mr. Buffett's point is that the stock market periodically goes nowhere for long stretches of time, and periodically performs in an outsized manner for long stretches of time. Although the reasons explaining any given period of stock market activity, up or down, can differ dramatically, it's striking to see how the numbers play out for periods approaching a generation in length.

Regards,

Mark