Leap Day — What a Difference 4 Years Makes!

A rewind to Bear Stearns, triple-digit gold and more

   

Today is one of those anomalies that everybody can’t help but talk about: leap day. The earth does not orbit around the sun in precisely 365 days, so once every four years, an extra day is added to the calendar to even things out.

Leap days are funny occasions because they happen rarely but reliably. Invariably, people wonder where they were and what they were doing the last time Feb. 29 was an actual date on the calendar — in this case, on Feb. 29, 2008.

For investors, introspection about the past four years is full of dramatic comparisons and historic events. Here are just a few facts that many stock market junkies might want to consider on leap day 2012:

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The Dow was at 12,266 … and falling fast.
The Dow Jones Industrial Average closed at 12,266.39, to be precise. Now the benchmark index is playing around the 13,000 mark. But don’t think the 6% gain from the levels four years ago is the whole story. The stock market had already shed 11% in three months and was clearly on the way down. In fact, across the next 12 months the Dow would almost be cut in half — bottoming at 6,440.08 intraday on March 9, 2009.

Unemployment was 4.9%. Seasonally adjusted joblessness, according to the Bureau of Labor and Statistics, was almost half of what it is now at just 4.9% based on February 2008 figures. The current rate is 8.3% as of January.

Gold was at $887.50. Based on London fixed prices, gold closed leap day 2008 at roughly half current pricing — meaning the precious metal has doubled in value during the past four years. As of yesterday, gold was trading at $1,785 per ounce.

There were roughly 700 ETFs. While I couldn’t find a hard number for Feb. 29, 2008, as of year-end in 2008 about 728 exchange-traded funds were available to investors. According to the Investment Companies Institute, there were 1,166 ETFs at the end of 2011 — and that figure is growing all the time.

Bear Stearns still was trading. A struggling Bear Stearns was at risk of collapsing under the weight of subprime mortgage bets. In just two weeks, the Federal Reserve Bank of New York would provide a $25 billion loan, and shortly afterward JPMorgan Chase (NYSE:JPM) would provide a lowball offer of just $2 per share for the once impressive financial stock to save it from utter ruin. As for Lehman? It still was alive and kicking, and few investors had the faintest idea that it too would disappear in just a few months’ time.

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A gallon of gas was $3.13. According to data at Gasbuddy.com, the average price per gallon of unleaded gasoline was $3.13 on Leap Day 2008. That actually was on the way up, as gas was in the middle of its 2008 surge to over $4 per gallon. Right now? Gas is at $3.68 nationwide and seems to be on the rise on the time …

Inflation was running at a 4% annual rate. Believe it or not, inflation was “higher” four years ago than the current rate of inflation. Specifically, in February 2008 we were seeing a 4% annual rate of inflation — and just this January, we were running at a 2.9% rate. Of course, in the coming months, America would face a very different fear — deflation, as by 2009 the rate of inflation actually turned into negative territory.

Apple was under $130. No article about stock market history is complete without talking about Apple (NASDAQ:AAPL) and its breakneck growth. So consider this: On Feb. 29, 2008, Apple closed at $129.91. AAPL stock is now more than $400 higher — for over 320% returns in four years, vs. just 6% gains for the Dow.

Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. Jeff Reeves holds a position in Alcoa, but no other publicly traded stocks.


Article printed from InvestorPlace Media, http://investorplace.com/2012/02/leap-day-what-a-difference-4-years-makes/.

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