Morgan Stanley shares have climbed 72 percent this year to close at US$27.56 in New York trading after the stock plunged 70 percent last year.
If you are not very careful reading into this statement, it may appear that that if it drop 70% last year and increase 72% this year, that means there is a nett 72-70 = 2% increase.
For those who know this is not the case, good for you!
But let me give a simple illustration for those who do not get it.
If your pay drops from $2000 --> $1000, it means a 50% drop.
But when your pay increase back from $1000 --> $2000, it means a 100% rise.
A 50% drop will have to be compensated by a 100% increase to break even.
And that means Morgan Stanley's stock price is still quite some way from 2 years ago.
Anyway, the 50% drop need 100% rise rule is also applicable for real-life events. For example, earning back credibility after you lost it - you have to work doubly hard.