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The Return to Irrational Exuberance
March 2, 2009 11:15 PM

Well, what goes up must come down, right? Of course we never wanted to revisit the levels of the stock market from back in 1997, but alas, here we are with the Dow under 7,000 and the S&P at 700. Twelve years of equity wealth wiped out in 18 months. Thanks Wall Street and W!

The night of December 5, 1996, Alan Greenspan uttered his legendary "irrational exuberance" comment. It was actually a question:

"How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?"

Mr. Greenspan's comments unsettled the stock market. The Dow fell 55 points the next day, which seemed like a lot at the time. But the bull market soon continued, and Mr. Greenspan stopped worrying. By the spring of 2000, he was quoting Wall Street analysts to justify high technology stock prices.

Isn't that quaint - a fall of only 55 in the Dow. Just a sneeze on a day like today when the Dow fell 300. And what do the winners and losers of the Dow Industrial 30 companies look like today?

The winners:

Wal-Mart, up 282%
Exxon Mobil, up 180%
United Technologies, up 136%
I.B.M., up 130%
McDonalds, up 120%

The losers:

General Motors, down 95%
Citigroup, down 89%
Bank of America, down 86%
Alcoa, down 63%
DuPont, down 63%
General Electric, down 52%

Pretty amazing numbers...

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