Inflation-adjusted DOW average = no cigar

TacticalPeek

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Thu Sep-28-06 01:56 PM
Original message

Inflation-adjusted DOW average = no cigar

Sorry 'bout the size.

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Sammy Pepys

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Thu Sep-28-06 01:58 PM
Response to Original message

1. Some sort of key would be helpful...n/t

.....

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Systematic Chaos

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Thu Sep-28-06 02:04 PM
Response to Reply #1

3. I think I get it.

The yellow line that represents the inflation-adjusted value has not exceeded the upper white boundary which it touched in 2000. In order for this "new record high" to be of any REAL significance, the yellow line has to go above the white one.

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Sammy Pepys

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Thu Sep-28-06 02:09 PM
Response to Reply #3

4. I don't think the yellow line represents inflation adjustments....

I'm pretty sure it represents the basic index level.

The upper white lines are probably Bollinger bands.

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TacticalPeek

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Thu Sep-28-06 02:28 PM
Response to Reply #4

5. It should be the index as adjusted, though I'm not sure what year was used

Here's another using a narrower band for graphing which is less smooth but still the same pattern.

A little more info is here:
http://www.traders-talk.com/mb2/index.php?showtopic=59904

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Sammy Pepys

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Thu Sep-28-06 02:43 PM
Response to Reply #5

6. Hmmm....

...I have to count myself as a skeptic regarding these charts and whether they actually reflect the returns realized by investors in the stock market. There's turnover in the companies represented as part of the index, the components of the Dow are weighted differently, and investing outside of the Dow components is commonplace. These charts probably don't account for any of that. Someone can easily compare their stock portfolio to the rate of inflation to see if they are beating the inflation rate, rather than rely on such charts which might not resemble the makeup of their portfolio at all.

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TacticalPeek

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Thu Sep-28-06 03:24 PM
Response to Reply #6

7. Well, I'd say these certainly do not equate to equity ROI.

It's simply the DOW Industrials, with all their inherent limitations, advantages etc.

My point is that on a day(s) of brouhaha about a DOW peak, it can be informative to also look at the performance as expressed in approximately constant dollars over time. With all the caveats applying to both adjusted and unadjusted data.

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Sammy Pepys

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Thu Sep-28-06 04:05 PM
Response to Reply #7

8. I agree here.

The better argument is that no one is talking about the NASDAQ or S&P 500 levels, though I'm sure they'll get some play when their time comes around.

And if you got into the Dow in late 2002/early 2003, you've likely been enjoying gains for quite some time already. Today is pretty much just another day in the market.

And the "All time high" thing is generally is kind of much ado about nothing. If the Dow closes at 11,723 tomorrow...it'll be a new all time high, but only by a point. That's a negligible difference from the previous one.

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Ignacio Upton

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Thu Sep-28-06 04:10 PM
Response to Reply #5

9. Look at how much housing has taken off!

Yeah I'm restating the obvious, but looking at the chart, the current housing boom looks like a mirror image to the Dow in the late'90s.

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skids

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Thu Sep-28-06 02:03 PM
Response to Original message

2. You wouldn't know where to get a daily ticker...

...of dollar-indexed dow, would you?

:kick: & R

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Ignacio Upton

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Thu Sep-28-06 04:12 PM
Response to Original message

10. This chart also better illustrates the degree of the economic cycle

The Crash of 1929 doesn't look like all that much on a normal chart of the Dow, but this one better shows its impact. Ditto for the economic problems of the '70s.

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mnhtnbb

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Thu Sep-28-06 04:36 PM
Response to Original message

11. Just sold into this 'high' this afternoon.

In May, when the Dow started to tank, I sold all our individual equities, but kept our mutual funds. Today I sold the mutual funds, leaving a nominal amount in each fund in each account--because we hold some closed funds. That way, the option to get back in is available.

I don't know how this market goes higher. What's going to drive it?
I am not a market timer, but we're approaching retirement. We can't afford to lose 20-30% and wait 6-7 years to get it back. Basically, by selling in May and today, I did what I wished I'd done in 2000.

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mnhtnbb

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Thu Sep-28-06 04:38 PM
Response to Reply #11

12. Oh, I know what drives the market to new highs. Instruments of torture!

Edited on Thu Sep-28-06 04:39 PM by mnhtnbb

What a fabulous new market is being opened up!

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