Feeling Bitten by the Bear?

The woods are filled with Internet retailers, content companies, and builders whose stocks are worth pennies compared to what they were a year ago.

Boo hoo. Get over it.

You’re not alone. The fact is we have what the stock folks like to call a “bear market.” Although the average bear bites off about one quarter of the market’s value, that’s just the average. Those companies whose proposition is based on greed, the proposition of all growth stocks, are bound to take a bigger hit.

I used Yahoo Finance to come up with just a few examples.


Take a look at this chart. Linux replaced e-tailing as the “sector of the day” about a year ago. The chart is for VA Linux Systems, a leader in Linux boxes, software, and discussion. If you put $1 into VA Linux stock about a year ago — when it was trading at $240 — you have about 12 cents right now.


Or take a gander at this slide. It’s the one-year chart for Internet Capital Group, the leader in creating B2B e-marketplaces. For every $1 you put into this stock back in January, you’re sitting on about 10 cents now.


Here’s the one-year chart for Lucent Technologies, formerly the networking equipment arm of AT&T. (Heck, look at AT&T.) If you put $1 into either one of these outfits about a year ago, you’ve got about 33 cents now.

Box Makers

Here’s one more. Dell Computer has been running ads on TV lately, laughing at “dot-com disasters” and suggesting you call its people, because its “E” is better. Well, if you put $1 into Dell shares back in May, you’re now the proud owner of two shiny quarters. (Both have pictures of George Washington on them, but that doesn’t mean you’re ahead.)

All the companies I’ve mentioned are real companies, all are well managed, and most even make money. Maybe they didn’t make quite as much money as the so-called experts thought they would. But all have real balance sheets any accountant would be proud to put his or her name under. Yet all these stocks are well “underwater,” meaning they’ve given their investors “haircuts,” and much of your investment in them has gone to “money heaven.”

Bear markets are like this. Fear replaces greed. People start demanding “hard assets,” and for now, the dollar looks like a fairly good one. (That may change; currencies have markets, too.) This bear market had real causes, high interest rates, and fast-rising oil prices. Its end will be based on real solutions, lower interest rates, and new technology.

Internet stocks were simply the first to feel the pinch because their values were based on the assumption of fast growth. That assumption proved faulty once everyone who wanted it could get dial-up access and the brick-and-mortar world didn’t come to an end.

When will the bear cease prowling and return to its lair? The good news is that most bear markets are short. The Nasdaq is down nearly 40 percent from its high of over 5,000. There are already some bargain-hunters nibbling at companies such as Cisco, Intel, and Microsoft. If the economy doesn’t crash, the worst could be over.

And if the “if” in that last sentence caused a little shiver in you, well then, you now know what a bear market feels like. Welcome to the real world, kid.

Related reading