One Year Later: Have We Learned Anything?

One year ago today, March 9, 2009, marked the end of a harrowing stock market crash that left the S&P 500 darn near 60% off its October 2007 highs.

Of course, March 9, 2009, also marked the beginning of a stock market recovery that has brought the S&P back up 68% in just one year. For individual stocks that were beaten up worse than the rest of the market, the past 12 months have delivered even more incredible gains.

Company

Stock Price Increase
March 9, 2009, to March 8, 2010

Dendreon (Nasdaq: DNDN  )

1,242%

Las Vegas Sands (NYSE: LVS  )

1,199%

Mechel (NYSE: MTL  )

694%

Ford (NYSE: F  )

643%

American Capital (Nasdaq: ACAS  )

636%

Source: Capital IQ, a Standard & Poor's company.

Though the advantage of hindsight reveals March 9, 2009, as one of the best single days to invest in most of our lifetimes, the situation wasn't nearly as clear back then.

The sky is falling!
To be sure, not everyone was doing the Chicken Little dance, but being a stock market bull in the weeks surrounding the March 9 bottom meant that you were very comfortable with people snickering behind your back.

So what exactly were the experts saying right around the bottom? Let's take a look:

  • On March 9, New York University professor Nouriel "Dr. Doom" Roubini said in an interview that the S&P 500 would likely go to 600 or lower and that the recession would last at least into the beginning of 2010.
  • Berkshire Hathaway (NYSE: BRK-B  ) Chairman Warren Buffett managed to find his way to CNBC that fateful day and had some particularly dour comments about the economy. It is, of course, important to note that he didn't express the same negative outlook for stocks. In fact, he even had some positive words for banks like Wells Fargo (NYSE: WFC  ) . And lest we forget, he had made a bold "buy" call in the fall of 2008.
  • A few days later, the always-frenetic Jim Cramer wasn't saying much at all after he got dressed down on The Daily Show by Jon Stewart.
  • Almost a week later, The Washington Post caught up with market gurus Bill Gross, Peter Lynch, and Burton Malkiel. The three gave an interesting range of answers, from Gross saying that he had sold all of the stocks in his retirement portfolio starting a year earlier, to Lynch quipping that the bargains were so great that he felt "like a mosquito in a nudist colony," to Malkiel simply saying that -- as always -- it was a good time to be an index investor.

As I dug back through the news archives, though, my favorite view from the time came from writer Joe Queenan, who, by March 6, had gotten fed up with the idea that individual investors shouldn't panic and sell their stocks and penned this:

A few weeks ago, I panicked again and moved another hefty chunk out of the market. The Dow was then trading at 7,500; now it is approaching 6,500. I fully expect to panic again at 6,000, probably at 5,000, and might even get in a bit of late-in-the-day panicking at 4,000. Tentatively, I am drawing a line in the sand at the crucial watershed of Dow 3,000, because any hysterical selling beyond that point would be anti-American and counterproductive. ... There is a time for hysteria, and a time when cooler heads should prevail. This is the time for hysteria.

Now I'm not hanging Joe out to dry just for the fun of it. His article is great because it perfectly captured the exasperation and exhaustion that so many individual investors felt as the market ground down to its eventual bottom.

March 9, 2010
Just one year later, and boy, what a difference. Not only has the market recovered significantly, but there are calls out there now that we've entered a "cyclical bull market" that will continue to push stocks onward and upward. Though the gains we've seen over the past year have made some folks cautious, to say that overall market sentiment is like night and day is a severe understatement.

But I want to know what you think. When we celebrate this March 9 anniversary next year, what will we be looking back at?

Berkshire Hathaway is a Motley Fool Inside Value selection. Berkshire Hathaway and Ford Motor are Stock Advisor picks. The Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Matt Koppenheffer owns shares of Berkshire Hathaway, but does not own shares of any of the other companies mentioned. You can check out what Matt is keeping an eye on by visiting his Motley Fool CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool. The Fool's disclosure policy assures you that no Wookiees were harmed in the making of this article.


Read/Post Comments (15) | Recommend This Article (39)

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  • Report this Comment On March 09, 2010, at 5:36 PM, TMFKopp wrote:

    @truthisntstupid

    Agreed. The "sky is falling" and the "sky is expanding at a never-ending exponential rate" are both worrisome attitudes. Too bad they're just so darn contagious!

    Matt

  • Report this Comment On March 09, 2010, at 7:39 PM, stan8331 wrote:

    It's ironic, but I suspect the primary thing that has kept the post-crash market from going through the roof is the capitulation of so many small individual investors. There are a lot of unfortunate folks who sold near the lows and STILL haven't gotten back in. Very bad for them, but not so bad for modulating the upward momentum to help prevent a euphoric new bubble from forming.

    In terms of making any fundamental changes to our regulatory structure to help prevent future bubbles and crashes, we haven't really done anything yet and I'm very doubtful that whatever reform package ends up getting passed will be very effective in that regard. The memory of this crisis is already starting to fade.

    The financial industry has massive influence on Capitol Hill and they will not be willing to accept lower current profits to help prevent a financial apocalypse off in the indeterminate future. I'm afraid it will take another actual Great Depression to get truly serious reform enacted. I'll just have to hope it doesn't come until after my last race is run...

  • Report this Comment On March 09, 2010, at 7:49 PM, bernbern0 wrote:

    The poll above is an indication of where most people seem to be.But I;m in a minority, the fourth group, who invest in businesses (solid dividend-growing ones) and couldn't care less about the market going up or down because we win both ways!

  • Report this Comment On March 09, 2010, at 10:08 PM, penchy1 wrote:

    You only win both ways if you can take advantage both ways. What's your secret?

  • Report this Comment On March 09, 2010, at 10:53 PM, bernbern0 wrote:

    To penchymd: You win both ways if you are investing for the long term, and if you are re-investing your dividends along the way. If the stock goes down you are lowering your original cost, buying more shares. You are taking advantage of compounding by watching your investment grow whether it falls or rises. And if you are in it for the long term, believe me, it will grow!

  • Report this Comment On March 10, 2010, at 3:26 AM, daveandrae wrote:

    Amen-

    The secret is, there is no secret.

    Buy low, and HOLD!

    Hold when everyone around is selling like the world is coming to an end. Hold when an investment firm downgrades your stock to a sell. Hold when all of your relatives have gotten out of the market. Hold when you find yourself in ball laying on the couch watching your entire nest egg melt away. Hold when you can't sleep. Hold when you can't eat. Hold for just, one, more, day. Then tomorrow, hold for just one more.

    Then once a month, read the poem "If." There is a beautiful line in that poem that I love, which says...If you can still wait, when you become tired of waiting.

    Absolutely Priceless

    Today, I only hold five stocks-

    Dow Chemical since 2006

    Pfizer since 2002

    McDonald's since 2003

    Harley Davidson since 2006

    General Electric since 2000

    I started my investment career in 1998 when I was 32 years old, the s&p 500 was trading at 1133, ( the index closed today at 1144, I think) with only $24,000 and have made damn near every mistake in the book, and I've still managed to grow my investment portfolio at an 18.3% annualized rate over the last 12 years. Thus, the power of TIME, (not timing), compound interest, and dollar cost averaging is stronger than you could possibly imagine.

    Above all, always think LONG TERM....As in pry my shares from my cold, dead, hands.

    A long term investment horizon correlates very well with a low turnover ratio. My turnover ratio over the last 12 months was 0%. The s&p 500 was up 68%. My 12 month trailing return was 160%, before dividends!!!

    Long term Investors believe in Dow 50,000. They believe in the companies that they own. They believe every bear market is nothing more than a BIG SALE. In our soul, we believe in capitalism and the power it has to make their children wealthy someday. It is much better for you to come to these conclusions from faith, rather than from a stack of statistics.

    Warren Buffett once said that Wall Street makes its money on activity. You make your money on inactivity. Think about it. It's very hard to do, but those words are the freaking Gospel. Laziness, bordering on sloth are the cornerstone of my investment philosophy.

    good luck everyone,

    Thomas Edmonds

  • Report this Comment On March 10, 2010, at 6:22 AM, CarryOnAgain wrote:

    Daveandrae,

    That is the most spot on description I've ever read, especially " Laziness, bordering on sloth are the cornerstone of my investment philosophy."

    So easy to say, but hard to do - unless you are Homer Simpson, lol!

  • Report this Comment On March 10, 2010, at 7:18 AM, steveballmer wrote:

    .... and just what were you guys saying on that day?

  • Report this Comment On March 10, 2010, at 8:42 AM, aliluya wrote:

    "Berkshire Hathaway (NYSE: BRK-B) Chairman Warren Buffett managed to find his way to CNBC that fateful day and had some particularly dour comments about the economy. It is, of course, important to note that he didn't express the same negative outlook for stocks. "

    Buffett may be wrong sometime, stocks market would be worst.

    http://gettopstocks.blogspot.com/2010/03/stock-market-rally-...

  • Report this Comment On March 10, 2010, at 8:58 AM, ewent0 wrote:

    Most people miss the games the players create. Until there is a return to trust in the market, surges upward will continue to yo-yo. Look for a longer period of stagnation punctuated by a few ups and downs as manipulated by the biggest players in the market games.

    If one considers the true definition of investment and its close alignment to business and commerce in general, the picture of US business has to change. Personally, I'm more in favor of investments in small business rather than TBTF corporations that use unsustainable financial practices to reward failure or lack of advancement.

  • Report this Comment On March 10, 2010, at 9:19 AM, daveandrae wrote:

    Steve-

    Back in March of 2009, every morning when I woke up, my only mantra was HOLD. Hold for just one, more, God (fill in the blank) day. Hold, even when every bone in my body was screaming, "get OUT!, get into cash right now!" I was determined not to let Mr. Market scare me out of my chit. Felt like I had stopped smoking again, for it was that difficult.

    All I had to do, was not smoke that day. That's it. Don't think about tomorrow. Don't think about next week, next month, or next year. Just don't smoke, today. Lay in bed and sleep all day if you have to. Just don't smoke, today.

    That's what buy and hold feels like at the bottom of a bear market.

    Everyone thinks it is investment performance that determines investor success. Sorry, folks, it's Investor behavior.

    BIG TIME!

    Finally, I said the hell with it, turned off CNBC and road my Harley down to Florida. Told my wife to bring the kids, and we went to Sea World, and universal park. Mom and I went to bike week during the night.

    I resigned myself to the possibility that my stocks could go to zero, and began living life again. If the world came to an end, or I ended having a margin call, so be it. My broker knew my number. Sometimes, you just have to let it all go. Sounds silly, but it worked for me.

    When I got back from vacation, Dow Chemical closed the Rohm and Hass deal, the stock fell to 5.63 a share and my business lost three jobs on the very same day. I told my business partner to BREATH, for I just knew everything was going to be ok. That day marked the bottom in the market, and in my business.

    Thank God.

    Today, Dow Chemical is my largest holding. Up more than 300% from it's low. Needless to say, I was buying as much Dow Chemical stock as I could afford back then. In spite of the fact that my broker had a sell rating on the stock, and Dow's credit rating had just got knocked down to one notch above junk.

    Still haven't sold a single share of anything in over a year. Been reinvesting my dividends the whole time too.

    The one thing every long term equity investor has in common is FAITH. if you don't believe in Dow 50-60,000. If you don't believe in what you're holding, down to your very soul. If you're not willing to ride everything you own down to zero, and start over again from nothing with worn out tools. if you cannot in vision your children holding the very same stocks you own, long after you're dead and gone, then you are most certainly speculating with your money.

    Thomas Edmonds.

  • Report this Comment On March 10, 2010, at 2:22 PM, TMFKopp wrote:

    @steveballmer

    ".... and just what were you guys saying on that day?"

    Great question. I wanted to have this in the article, but there just wasn't enough room. To a large extent it was business as usual.

    - David Lee Smith was talking about the opportunity he saw at BP (http://www.fool.com/investing/general/2009/03/09/bp-means-bi...

    - Ivan Martchev was talking about his view that oil wasn't going to stay depressed (http://www.fool.com/investing/international/2009/03/10/china...

    - Rich Munarriz was talking about developments with Amazon's Kindle (http://www.fool.com/investing/general/2009/03/02/kindle-lose...

    From a macro view:

    - Morgan Housel ran a pretty revealing poll that showed that most readers still thought the market was going to fall (http://www.fool.com/investing/dividends-income/2009/03/02/wh....

    - Billy and Akaisha Kaderli talked about how they were keeping their heads on straight amid the chaos (http://www.fool.com/retirement/general/2009/03/09/the-world-...

    - Ilan Moscovitz had nearly perfect timing, even though the thrust of his article was to say "don't bother trying to time the bottom" (http://www.fool.com/investing/value/2009/03/06/is-this-the-m...

    As for me... well, I was:

    - Looking at Buffett's 2008 shareholder letter (http://www.fool.com/investing/value/2009/03/04/the-wit-and-w...

    - Scratching my head over investment banking bonuses (http://www.fool.com/investing/dividends-income/2009/03/05/wa...

    - And wondering if there was anyone we could put in jail (http://www.fool.com/investing/dividends-income/2009/03/06/wh...

    Matt

  • Report this Comment On March 11, 2010, at 3:51 PM, bernbern0 wrote:

    Well said truthisntstupid and daveandrae!!!!!!

  • Report this Comment On March 14, 2010, at 5:00 AM, daveandrae wrote:

    Wow-

    Just read all of the comments from the article. It is amazing to me just how spectacularly WRONG 95% of the commentators were.

    It felt as if I was reading the final testament of Christopher Columbus' crew on the night of their fateful voyage. I would wager that they thought they were about to fall into the abyss.

    Fear truly is contagious

    There are many lessons to be learned here.

    Here are some of my favorites....

    1. A bear market is a period of time in which people, who think this time is different, sell their stocks, at panic prices, to people who realize this time is never different.

    Nick Murray

    2. There is a tide in the affairs of men which, taken at the flood, leads on to fortune-

    William Shakespeare

    3. Don't worry about being in the market during the next 30% decline. Worry, a lot, about being out of the market during the next 150% advance.

    Nick Murray

    4. Be greedy when others are fearful. Be fearful when others are greedy.

    Warren Buffett

    5. Be careful not wish away the volatility of the market. Because you are, whether you realize it or not, wishing away the return.

    Nick Murray

  • Report this Comment On March 15, 2010, at 6:17 PM, daveandrae wrote:

    Truth-

    The pendulum swings both ways. This is one of the reasons why we are nowhere NEAR the top of the latest bull market.

    Back in 2000, a woman at my firm fired her broker after he told her NOT to leverage her house to buy tech stocks. She did anyway.

    A couple SUED their financial advisor after he generated a 28% return for them in 1999. Seems they were upset because most of their friends got an 80% return under diversifying in the Nasdaq that very same year.

    Read the American Sucker. Guy started out with 1 million. Ended up with 200k. Put it ALL in tech stocks, right at the PEAK of the market.

    I personally sold out of Hologic at 8 and Simon Property Group at 20 to buy Cisco at 60. Cisco promptly fell to 8, and Hologic exploded to 100 by 2004. Simon, which was trading at book value and yielding a 9% dividend when I sold out of it exploded to 120 by 2007.

    Lesson Learned, the hard way.

    Stay far away from the freaking herd, (which, by the way, is falling all over themselves to buy Gold, Bonds, and emerging markets right now)

    Thomas Edmonds.

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