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By Pat Dorsey, CFA | 12-23-2009 11:11 AM

Why Stocks Have Stunk Over the Past 10 Years

Morningstar's Pat Dorsey says it all comes down to three things: valuation, valuation, valuation.

Pat Dorsey: Hi. I'm Pat Dorsey, director of equity research at Morningstar. Happy holidays, though you may not be feeling quite so happy if you're looking at your financial statements from 1999 and comparing them to today, given that the past 10 years have been frankly pretty awful for the stock market.

And I'm sure you are going to read a lot of articles in the media, both financial media and otherwise, over the next few weeks talking about just that: what a terrible decade it has been for stocks and how, on an inflation-adjusted basis, you've actually lost money in stocks over the past decade.

And a lot of these articles are going to probably put a spin on this, thinking about, "My gosh. Why are people putting money in the stock market at all?" And you've got everybody putting lots of money into bond funds, which, of course, I talked about last week.

But I'll bet you that very, very few of these articles will talk about why the past decade was so terrible for stocks, and will make the point that past is not always prelude. Let's think about the past decade and why it was so terrible for the stock market.

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