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Dow down 39.4% from year-ago high, wiping out $9.3 trillion in market value

In the wake of S&P's downgrade watch of General Motors (NYSE: GM), which sent its shares down 31% to a 58-year low, the Dow lost another 679 points today. Exactly a year ago, it was levitating at 14,164 -- now 5,585 of those points are gone. In the process, $9.3 trillion in market value has evaporated. And that loss of market value shows no signs of stopping.

A week ago, I suggested that investors who need their funds in the next six years should give some thought to cutting their losses. Since then, the Dow has lost 2,252 points. As a reminder, during the Great Depression, the Dow lost 89% of its value. If you end up losing 40% of your investment instead of 90%, you may look back and think that you were wise to have salvaged something.

Last Friday, the White House signed an $850 billion bailout bill. That bill was pushed as a way to stop a catastrophe. With $3.2 trillion in stock market value lost since then, some might argue that the bill's benefits were oversold. Meanwhile, the short-term cash market seems to have stopped working as the TED spread peaked at 4.14%. I've suggested that a cull and capitalize plan for the U.S. banking system is essential for restoring the functioning of the credit markets. Let's get this started.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in GM securities.

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DJIA+494.138,046.42
NASDAQ+68.231,384.35
S&P 500+47.59800.03

Last updated: November 22, 2008: 12:27 PM

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