### Economic Memo: Do the math (on the stock market)

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Wednesday, April 11, 2001, 12:00 a.m. Pacific

Stephen Dunphy / Times staff columnist

Economic Memo: Do the math

Maybe we should try to get all the bad news out at once about the stock market.

An investor who bought at the top of the market in 1929 had to wait until 1955 to get even. Granted, it was the worse time in the economic history of the United States with a decade of the Great Depression followed by a world war. Still, you get the point.

Even more recent tops can provide a sobering view on the market mania that peaked last year - a buyer at the top of the market in December 1972 waited a decade for the payoff.

What does it mean? The bubble has burst and it will be a long time before many of last year's high fliers ever make it back to where they were - if they ever do.

Back when I was a business editor, I used to tell reporters to "do the math." It can be very revealing.

Let's take Amazon.com since it is the current darling of Wall Street with a 43.5 percent gain the past few days after the Internet retailer said sales were higher than expected and losses were smaller than expected, sort of. The stock zoomed from a recent low of \$8.37 a share to \$12.01 at the close yesterday.

Doing the math, however, shows why investors who bought at the top will have such a hard time getting their investment back. Using just the 52-week high of \$63.38, Amazon lost 86.8 percent of its value when it hit \$8.37 a share. To return to its yearly high, Amazon must have a 657.2 percent gain. To get back to the all-time high of more than \$106 a share, the needed gain is more than 1,000 percent.

Check out page 4 of the current Barron's Magazine, the Dow Jones' weekly financial newspaper. It has a chart showing what it calls the "drop dead Dow." It lists the 30 stocks in the Dow Jones industrial average and their percent change from recent two-year highs.

The point of the chart is to show that a bear market - defined loosely as a decline of 20 percent or more - exists right now when you take a slightly longer perspective than year-to-date figures.

Every stock in the Dow is down more than 20 percent from two-year highs - we are told to buy and hold, aren't we? - with some of them "down a bunch," to use the precise terminology of Barron's. Intel, AT&T, Hewlett-Packard and Microsoft all vie for the top spot with more than 50 percent declines.

At the bottom of this ignoble list with losses of only 21.61 percent is Boeing. Still a bear, but at least it is the best of the bears.

A check of public companies in the area shows 13 stocks now trading at less than \$1. This is of more than passing interest for investors because a company trading below \$1 for 30 trading days is in danger of being delisted.

Stocks can still be traded even though they are delisted. But they trade on the over-the-counter market. This market is much smaller, much less liquid (how easy it is to buy and sell) and much less visible. Most newspapers, for example, do not report trades in the OTC market. The National Association of Securities Dealers maintains what it calls the OTC Bulletin Board Service providing quotes, last-sale prices and volume.

The list: Advanced Radio Telecom, Aptimus, Avenue A, Concur Technologies, Data Dimensions, ImageX, Internap Networks, Loudeye, N2H2, Network Commerce, Onvia, PhotoWorks and Saflink.

Even venture capitalists are starting to lose money in this market slump.

Venture Economics said its preliminary quarterly Private Equity Performance Index for the last quarter of 2000 posted a decline for the fourth quarter in a row, but it was the first quarter where results also dipped into negative territory at minus 6.3 percent.

For the full year, however, the venture industry was up 37.6 percent. Venture Economics said investors continue to be surprised by how much the performance of their venture portfolios is tied to the public markets.

-- (M@rket.trends), April 11, 2001