I have made it a habit to save the print edition of the Wall Street Journal on certain key dates including March 30, 1999, the day after the Dow Jones Industrial Average (DJIA) first crossed 10,000.  Although the DJIA is a flawed benchmark, no other  index has captured the imagination of the public to the same degree.  As we again approach the 10,000 level, there appears to be no shortage of commentators ready to discuss what this means for the overall market.

It comes as no surprise that value investors attach no particular significant to round numbers for individual stock quotations or for market indices.  However, it is hard to avoid recognizing the obvious fact that the past decade has seen very disappointing returns for index investors given that stocks started the ten year period at very high valuations.  This is true of many individual DJIA components as well.  One example of a lost decade for an individual DJIA component, Wal-Mart Stores, was discussed here earlier in the year.

The ultimate lesson is that the price investors pay when entering a position matters.  An investor can correctly identify a wonderful business that will compound sales and earnings for a decade but still end up with poor returns if the entry price is excessive and earnings multiples contract.

Wall Street Journal:  March 30, 1999

Here are a few examples of the stories that ran on March 30, 1999 in the Wall Street Journal.  As I flip through the print copy, it is striking how different the physical paper looked a little over ten years ago.  The paper was still a large broadsheet, charts were primitive, and only a few ads were in color.

Click on image for larger rendering

Click on image for larger rendering

• Headline:  “If This Is a Bubble, It Sure Is Hard to Pop”. Quote:  “The market has been strong because lots of people want to hold stocks.  It will continue to be strong as long as they continue to be willing to pay more for stocks than they used to.  But is this eagerness to hold stocks a permanent shift that will fuel the bull market for another decade — or could it quickly swing in the other direction and take the market with it?”
• Headline:  “Ordinary People Show Extraordinary Faith, Reaping Rich Rewards”.  Quote:  “I don’t think of it [stock market] anymore as risk, or myself as a risk taker for investing.”
• Amazon.com’s shares surged 7.6% as investors reacted to the company’s move into auctions and the news that it had agreed to buy 50% of Pets.com.
• As Lloyd’s Names Disappear, Market Risks Losing Its Prestige”. Article on page A21 discusses how Warren Buffett and other corporate investors have come to dominate the Lloyd’s of London displacing the traditional role of individual “names”.
• Headline in Marketplace:  “Traditional Managers Have to Jump Hurdles To Join Internet Firms.” Quote:  “Players in the Internet world are not interested in speaking with experienced managers who come from backgrounds different from their own.”
• Headline:  “High-Tech Firms Chase IPO-Savvy CFOs”.
  
• Headline:  “Bulls Say a Heated Market Could Get Even Warmer”. Quote from Abby Joseph Cohen:  “This is an economy that is doing quite well and we think will support an increase in stock prices.” Of course, in the short run, this was accurate and the DJIA continued its advance into early 2000.  Quote from Henry Blodget:  “Never have there been so many investors chasing so few quality shares.”  Quote from Joseph Battipaglia:  “What price do you want to pay for a Mattise?”  Quote from John Kenneth Galbraith:  “There are far more people in the market, including mutual funds, than there is intelligence to go around.”
• Headline:  “President of GM Seems to Step Back From Proposal” Page C25.  Quote:  “General Motors Corp.’s president [G. Richard Wagoner Jr.] appeared to back away from an ambitious plan to revolutionize the way the company makes small cars, a day after the United Auto Workers vowed to fight the new approach, which it views as a threat to union jobs.”

And a few statistics from “Money & Investing” recording activity on March 29, 1999:

• Dow Jones Industrial Average closed at 10,006.78
• S&P 500 closed at 1310.17.
• 30 Year Treasury Yield:  5.639%
• 3 Month T-Bill Yield:  4.40%
• LIBOR:  5%
• Gold:  $280.30/ounce
• Oil:  $16.43/barrel
• Natural Gas Henry Hub Cash:  $1.805/mmbtu
• USD/Euro:  1.0735
• USD/UK Pound:  1.6153
• Yen/USD:  120.26

This trip down memory lane brings to mind an old saying:  Those who fail to study history are doomed to repeat it.