January 2, 2003

SR: Year-End Market 2003

The Year in Numbers


Wall Street is all about numbers. Percentage gains, price-to-earnings ratios, spreads, yields, interest rates, shares outstanding, layoffs, housing starts, crop reports, OPEC quotas. It's a never-ending stream of data that can be overwhelming, to say the least.

But while most of the numbers -- outside of your own net worth -- tend to the mundane, there are always ways to slice and dice the dizzying flood of knowledge that make it more interesting.


The number of people who have chaired meetings of the Public Company Accounting Oversight Board since it was established by the Sarbanes-Oxley bill in July 2002, as part of the government's drive to "clean up Wall Street." William Webster resigned as chairman before he could hold a meeting after it was discovered he'd been a director at a company embroiled in an accounting mess. (It's also the number of formal meetings the board has held, incidentally, though it did hold at least two informal meetings to discuss organizational and budgeting issues.)


The percentage of U.S. stock funds in the black for 2002, according to fund tracker Morningstar Inc. With more than 5,500 equity funds to choose from, a scant 43 ended the year above water. In a world where the fund industry push their best funds, this should be the ultimate reminder that past performance is no indication of future investment gains.


The percent gain of the average gold fund, annualized over the past decade. Gold investors seem to have had the Midas touch this year, generating a 60% rise over the past 12 months, according to Morningstar, but the seeming safe haven hardly looks like a precious metal over the long haul. More like a fool's move when compared to the 10.1% annualized gain in the S&P 500 over the same period.


The number of major U.S. airlines that filed for bankruptcy protection. USAirways filed in August and UAL, parent of United Airlines, found the skies a little less friendly and filed in December. Both airlines continue to pursue reorganization plans, and are struggling to keep their operations going in the worst downturn in recent memory for the airline industry.


As in years. That's how many consecutive years each of the major stock indexes -- the Dow Jones Industrial Average, the Nasdaq Composite Index and the Standard & Poor's 500 Index -- have declined. The last time the stock market posted an annual gain, Bill Clinton was in the White House, George W. Bush was in the Texas state house, Enron was flying high, the Yankees were in mid-dynasty mode, and Prince's "1999" was the soundtrack to apocalyptic visions of planes crashing to the ground because someone forgot to make a mainframe Y2K-compliant.


The number of major accounting firms in existence after the demise of Arthur Andersen. An industry once known as the Big Eight has become the Final Four.


As in decades. That's how many it's been since the market, as measured by the Dow industrials, lost ground for three straight years. In the history of the Dow industrials before now, there have only been three stretches of three or more years in which the average declined, and only once has the decline extended to four years, at the beginning of the Great Depression from 1929-32. Comforting. What ended the last three-year down cycle? Oh yeah, World War II.


That Harvard Business School education apparently isn't worth what it once was, as shown by the number of times Jeffrey Skilling, former CEO of Enron and a graduate of Harvard's MBA program, told the Senate Commerce Committee during hearings on the collapse of the company he once led, that he was "not an accountant" (according to a transcript of the hearings). Mr. Skilling's evasive answers typified the response to problem behavior uncovered in executive offices in 2002.


Percentage by which Wal-Mart's sales rose from the year before on the Friday following U.S. Thanksgiving Day. The Bentonville, Ark., discounter said that sales for that day were $1.43 billion, a single-day record for the retailer. Home electronics and small home appliances led the charge, as consumers continued their rapacious spending in the face of a gloomy economic outlook.


What a difference a year makes. Back in late 2001, analysts were, not surprisingly, falling all over themselves to predict that 2002 would be the year that the market, and earnings growth, would bounce back. The average analysts' forecast for corporate earnings growth was 16.5%. But after yet another awful year on Wall Street, and one that saw major brokerage firms targeted by and later settling with the SEC and New York Attorney General Eliot Spitzer over improper research practices, those projections were scaled back to a far more realistic 1.8% by the end of the year, according to Thomson First Call.


As in cents. Imagine you had $1 in your pocket. Imagine you decided that investing it in a mutual fund would be a really good idea. Imagine the mutual fund you chose was the Alliance Premier Growth Fund. It's the first day of trading in 1999, and you boldly sink that $1 into Alliance's flagship, the top-selling fund that year. The fund owned more Enron shares than any other, and continued to build its stake right up to the company's collapse. Due to those losses, if you cashed out now, you'd have 56 cents, according to Boston fund consultancy Financial Research Corp.


The percentage of U.S. stock funds that trail the S&P 500 Index over the past ten years, according to Morningstar.


The cost of gold, in dollars per troy ounce, in trading Dec. 19, a six-year high. Despite the performance of gold funds over the past 10 years, investors kept piling into the yellow metal this year, sending the price soaring by 25%, and continuing a surge that saw gold gain almost $100 an ounce since February 2001, when it was trading at about $254. That represents a 39% surge in under two years.


The number of stocks deleted from the Nasdaq Stock Market in 2002, nearly 10% of the exchange's total stocks, according to Nasdaq. Of those, 281 were regulatory delistings, and the remainder were voluntary from companies that merged, liquidated or moved to another exchange. While that may seem bleak, in 1998 there were 596 regulatory delistings alone.


The number of points by which one of last year's most bullish strategists, Ed Kerschner of UBS Warburg, overshot in his initial predictions for the S&P 500's performance in 2002. Late in 2001, Mr. Kerschner issued an outlook saying the S&P would jump to 1570 by the end of this year; it closed at 879.82, meaning Mr. Kerschner's target was a whopping 78% above the year's finish. Time to get a new crystal ball, Ed.


The last time the Dow industrials fell more than this year's 16.76%. In the year of "Star Wars," "Saturday Night Fever," punk rock and Jimmy Carter's inauguration, the Dow industrials fell 17.27%. But before you get too down, remember that as it stands now, the Dow industrials 2002 loss is only the 15th largest in history.


That's the number of pages of internal White House documents that were turned over to the Senate Governmental Affairs Committee in June for its investigation into the Enron debacle. The White House stonewalled for several days before turning over the documents, arguing that the Senate committee had insufficient security measures in place to prevent the documents from leaking to the public. Sen. Joseph Lieberman, the chairman of the committee, assured the administration that the documents would be kept in a locked room and only staff members who had signed a confidentiality agreement would be granted access, as the Senate tried to unravel one of the biggest corporate messes in history, and determine what the federal government could have done to prevent the massive losses incurred by thousands of investors.


The cost, in dollars, of Dennis Kozlowski's umbrella stand for his New York apartment. Mr. Kozlowski was ousted as chief of Tyco after he came under fire for alleged sales-tax evasion and was accused of plundering the firm's assets for his own use. Guess he needed that stand in anticipation of the storm of criticism and anger that was headed his way.


The cost, in dollars, of Jean-Marie Messier's New York apartment. purchased by his company for his use. The former chief of conglomerate Vivendi Universal had to pound the pavement like other New Yorkers, though -- part of his severance package from the European firm involved giving back the apartment. But Mr. Messier walked off with just under $18 million, so he shouldn't have much trouble finding new digs.


The amount the major companies in the securities industry agreed to pay in fines and restitution for a research system gone bad. New York Attorney General Eliot Spitzer was attacked by many for targeting Wall Street, but Mr. Spitzer saw problems when an industry was making money hand-over-fist at the expense of the little guy, and he set out to stop them from doing so. Wall Street has repeatedly fallen back on the "market will correct itself" mantra, but time and again history proves it wrong.


The amount of money shaved from stock-fund coffers by investment losses and investor redemptions since Jan. 1, 2000. It's a 30% drop according to data from the Investment Company Institute.

-- Dave Kansas, Alexandra Kaptik, Ian McDonald and Erin Schulte contributed to this article.

Write to Michael Broadhurst at michael.broadhurst@wsj.com