DOW Breaks 10,000!
Would of, could of, should of…..
If I had jumped into the stock market and bet on the DOW last March, my investing friends say that I would have made a tidy sum.
As I understand it, even though unemployment continues to increase and housing prices continue to decline, in the few short months since the world economy nearly collapsed, the stock market, a leading indicator, is now promising a recovery. Apparently the DOW has been rapidly buoyed up by the stock prices of companies that specialize in financial trading. (Hey aren’t those the guys that got us into this mess in the first place?).
I suppose it makes sense. Those companies are the ones that have been given access to vast sums of taxpayer dollars at 0% interest and an implicit government guarantee that the taxpayers will bail them out again if they blow one of those too-complex-to-understand bets. With a sweetheart deal like that, who wouldn’t play some long-shots with lots of upside?
So now I am wondering if I should ante up a chunk of money to get into the game. Hey, I’m only human. My broker says yes, but the fine print still says the past is no predictor of future performance. But hey, people who are in the market are getting get richer as I write this!
Even though past performance does not predict future performance, I found this cool historical composite chart on the Internet and it got me to thinking.
The black line is the DOW circa 1928. 381 was the high and 128 was the Great Crash, which was followed a few short months later by a nice little “happy days are here again” rebound. The rest is, as they say, history. The red line is the DOW circa 2008. 14000 was the high and 7000 was our very own “great crash”. I guess 10000 is Happy Days all over again. Or is it?
Anyone want to help me out with an informed prediction?.
Happy days are here again, right?
We are in a secular bearmarket in Western markets. What you don’t want to be doing is buying and holding the market. The best way to play the market in my opinion at these levels is via a long-short product that can offer some downside protection should things go sour – and the can quite quickly. David Rosenberg, Albert Edwards, Jeremy Grantham all point to the S&P 500 being overvalued. In my humble opinion (and I also admit I never thought the rally would go this far), I think the market is way ahead of itself. Barrons Roundtable thinks the rally is not marked by quality but merely a “dash to trash”, i.e. leveraged plays. Let the buyer beware!
Ah, secular! Now I understand. Thanks!