Old Soldiers Syndrome

Does anybody remember Sun Microsystems (JAVA)? A decade ago this high-profile name dominated the indexes, the most active list, was frequently mentioned on television and found in the portfolios of thousands of individual and institutional investors.

In the late 1990s, as the Internet was just coming of age, there existed a magnetic optimism about the tremendous effect it would have on our lives. Sun Microsystems was to be a big part of that change. This was a stock you simply had to own.

In the years that followed, the Internet did change everything, with Sun's products playing a big part. Yet the company, like most of the former go-go tech stocks, has never been able to recapture the valuation premium it once enjoyed.

For most of this decade, the stock has been nothing short of a disaster. At $4 a share, Sun now trades right around where it did back in 1995, before the massive tech boom that saw shares briefly eclipse $250/share in the summer of 2000.

Now joining Sun at 10-year lows are the shares of many of the country's largest banking institutions, even widely owned names such as Citigroup (C) and Bank of America (BAC). And even if the much-battered financials stop falling, it will likely be years before these stocks regain their early 2000 status as bonafide market leaders. After every bull market, a refractory period is needed during which the stocks must recoup. Markets don t tend to drop 50% because they're likely to turn around and run back up to former highs.

Just as with Sun Microsystems or Time Warner (TWX), the financials fortunate enough to survive the crisis are likely to churn around at depressed prices for years. And as I pointed out last week, the fact that the government plans on taking an ownership stake will weigh as a hindrance rather than a help.

Pillaging Pensions

Those advocating for even more federal involvement in the financial sector might want to take a look at what's transpired in Argentina in recent days, where a government plan to nationalize the country s pension funds sent stock plummeting to their biggest two-day drop since 1990. The benchmark Merval stock index dropped 18% on Wednesday and is down more than 56% year to date. Yields on local bonds are now topping 30% on fears the country might default on its debt.

Don't Cry for Me

Argentinean ADRs: BFR, BMA, GGAL, IRA, TEO 1 year

Astute readers might remember me pounding the table for many of the Argentinean ADRs in the chart above back in 2002. Back then, amid the newly emerging commodity boom and a commitment to more free-market practices, Argentina s previously collapsed economy soared. Now that old-school socialism has returned, the markets are reacting accordingly tanking across the board. Stocks like BBVA Banco Frances (BFR), IRSA Investments and Representations (IRS) and Telecom Argentina (TEO) all former growth names, have been crushed.

Moreover, the guarantee provided by a state-run pension program is usually anything but secure. Consider that, in our own country, Calpers, the nation's largest public pension fund, announced Wednesday that investment losses of more than 20% this year might end up requiring additional contributions from workers in the neighborhood of 2% to 4%.

In Argentina, government plans to loot pensions, while in California, they are just poorly run. Both highlight why government should not be involved in retirement planning of its citizens.

Sage Words

There was a time in this country when pants were mended, toys were passed down and pennies were pinched, not thrown into the tip cup at Starbucks (SBUX). Given the state of the economy, there's no question that conspicuous consumption is out. Thrift has replaced green as the new black.

Thrift: A Cyclopedia, by David Blankenhorn

To that end, you might want to reserve a place on your holiday shopping list now for Thrift: A Cyclopedia (Templeton Foundation Press, 368 pages, $34.95), a thoughtful collection of quotations and historical insight on this seemingly antiquated concept that has quickly come back into fashion.

Author David Blankenhorn has assembled a bear market s worth of material covering the ideals of prudence, diligence and sound financial stewardship. Remember those old chestnuts? You will.