Someone needs to brush up on math
Regarding last week’s editorial, "What’s behind the numbers?" it states that "It (a recent magazine article mailed out by a major financial firm) showed the drop in the S&P 500 from Sept. 15, 2008 to March 9, 2009 to be -43.28 percent, while the increase from March 9, 2009 to Dec. 31, 2009 amounted to a +64.38 percent. Sounds like stocks more than broke even, doesn’t it?"
Well, no, it doesn’t. In fact, it’s simple arithmetic. The "round trip" of a stock trading at $100 per share that drops -43.28 percent, and then rises +64.38 percent, returns that stock to $93.24 per share. Think of a $100 stock losing half (-50 percent) of its value, thus dropping to $50. That same stock must now double (+100 percent) in order to return to $100. As I said, it’s simple arithmetic—arithmetic we should have learned in middle school.
The editorial goes on to ask "Is the financial industry puffing returns from the stock market?" and counsels us to "Beware when the financial industry uses enticing percentages in this manner."
Puffing returns? Enticing percentages? Clearly, the insinuation is that the industry is trying to, at worst, hoodwink the public, or at best, embellish the stature of both the returns of market and any rebound in the economy.
Rather, it seems to me that someone needs to dig out their old sixth grade math book and brush up on their arithmetic.
Oh, and there’s an error in the last paragraph. Instead of March 9, 2008, it should have read March 9, 2009 as it did in the two paragraphs immediately preceding.
John A. Black III