Monday, 30 June 2008

Share Indices for first half of 2008 - So you think this is bad?

It was another depressing month on the market. The FTSE100 slumped 7%; so the 9% fall in NASDAQ or the 6% fall in the UK FTSE SCS Index were not that dissimilar.

It’s been an even worse first six months of the year for the FTSE100 down 13% since 1st Jan. Put against that against the 2% fall in the Techmark and the 6.6% fall in the FTSE SCS Index and they look quite good! Telcom was the worst hit with a 21% fall in the UK Telcom associated indices as waning consumer confidence hits both mobile and broadband takeup. It was EVEN worse for the European Indices with the FTSE Euro Telcom Index down 26% and the FTSE Euro tech Index down 30% this year so far.

So how does this compare with the great Y2K/ crash of 2000?

You may remember (it is actually carved on my heart!) that the bubble burst on 6th March 2000. The FTSE UK SCS Index fell 35% in the first six months of 2000 (ie 1st Jan 00 to 30th June 00) That dragged the FTSE100 down 9% and Techmark down 10%.

Awful. Sure – but it was to get MUCH, MUCH WORSE! At the Regent Conference in Feb 2000 I had predicted a 60% fall in the Tech Index, from its then high, by end of 2000. I was greeted with a metaphorical round of rotten tomatoes as the indices continued to rise that month and people really did seem to believe that the indices could defy gravity - for ever. But in the event it actually turned out to be worse than that!

The comparisons between today’s Index levels and those of eight years ago on 30th June 2000 – when the FTSE SCS Index was already down 35% YTD and a massive 45% off its March 200 high - make uncomfortable viewing. The Indices just kept falling...and falling, reaching their nadir in 2003 when the FTSE SCS Index was just 289! It has nearly doubled since but is STILL down 82% in the eight years since 30th June 2000. Techmark is also down a massive 56% and even the FTSE100 is down 12%.

The future?

I’m not for one moment suggesting that we are in for such massive falls again. Simply because we start from such a lowered base that such a fall would deem the whole sector pretty valueless if it did! But it would be a very brave or foolish man who suggested that, in the current climate, there was not a lot of further ‘downside-risk’ in the market.


Researching the article meant pulling out copies of SYSTEMHOUSE from those days.
The frontpage editorials included some of the best, most classic, headlines ever to appear in SYSTEMHOUSE like:-

- The Emperor’s New Clothes (Jan 00) – describing the crazy ratings

- Dot.Con (Feb 00) describing the dodgy tactics and accounting of some of the new stock market entrants. I doubt I would risk writing such an article nowadays. I think my experiences of getting sued by at that time really did make a lasting impression on me!

- It doesn’t take a Rocket Scientist (July 00) with its front page photo of W von Braun – explaining the fall, predicting even more decline and making the comment that the industry was still ‘Living in Denial”.

As new readers might by now be realising, I have never courted popularity and have often said things that were pretty universally unpopular. I do not intend to stop now!

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