Tech stocks pounded back to 2003

Fed's fears of multi-year recession crush stock indexes

Public stocks, like private-company valuations, have just completed a five-year time warp.

The U.S. stock market got crushed today after a transcript of the Federal Reserve's latest meeting showed that the nation's top bankers fear the recession will last at least a year.

No sector was spared, with everything from bank stocks to airlines to tech shares getting hit.

The Nasdaq is down 45% this year and back to levels not seen since the beginning of the Iraq War in March, 2003. The Dow and the S&P 500 are also  

We've heard before how private-company valuations lag those of their public counterparts by six months or so. This latest leg down has added to major year-to-date losses for the biggest Internet firms.

No surprise that Yahoo is down 60 percent, given the sad end to its takeover dance with Microsoft.

But Google, eBay and Amazon.com are down just as much, which means only the most attractive private companies are going to be able to avoid down rounds if they raise money next year.

We've already heard that seed-stage rounds are back to where they were five years ago.

For late-stage private firms that have at least a year's worth of cash in the bank, the stock drop is a non-event - for now. But wth each new leg down, tech valuations are being re-set.

That merely reflects the new economic reality, as spending on everything from business travel to advertising is expected to come under pressure in a bad economy.

If the downturn lasts as long as the Fed fears, that trend could affect private valuations into 2010 and beyond.