DOW 10,000!!!! Oh Wait, Make That 7,537

Charts at link...

http://www.zerohedge.com/article/dow-10000-oh-wait-make-7537

"Another great representation of the amazing loss of purchasing power by the US public are today's oblivious statements about the Dow at 10,000. While in absolute terms the Dow may cross whatever the Fed thinks is a necessary and sufficient mark before QE begins to taper off (Dow crosses 10k just as Treasury purchases expire), the truth is that over the past 10 years (the first time the DJIA was at 10,000) the dollar has lost 25% of its value. Therefore, we present the Dow over the last decade indexed for the DXY, which has dropped from 100 to about 75. On a real basis (not nominal) the Dow at 10,000 ten years ago is equivalent to 7,537 today! In other words, not only have we had a lost decade for all those who focus on the absolute flatness of the DJIA, but it is also a decade where the US Consumer has lost 25% of purchasing power from the perspective of stocks! You won't hear this fact on the MSM.

And if you want to be really scared, here is the comparable representation for the DJIA in ounces of gold. It cost about 30 ounces to buy the 10,000 Dow last time. Now it costs less than 10."


The Best Dow 10,000 Investment . . .

http://www.ritholtz.com/blog/2009/10/the-best-dow-10000-investment/

"Has to be those Dow 10,000 hats that CNBC had their anchors first wear in 1999. They got to reuse them so many time!

I wonder if they will break them out again this time . . ."

DUers and Freepers both trying hard to piss on the parade.

to the mix.

by bringing up facts. Damn them!

Hardly anybody follows what you do anymore.

the only thing I see is Wall Street sociopaths parading around with the carcass of the once thriving American middle class.

kick

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explanation of the value of the US dollar is just a bit simplistic. There are many factors which affect the value of the US dollar, but the stock market is not one of them. the dollar's value is actually more closely tied to US debt, the price of oil, treasury notes, and foreign exchange rates, than the performance of the stock market:

http://useconomy.about.com/od/tradepolicy/p/Dollar_Value.htm

The stock market has little to do with economic realities, but rather with people's expectations about the economy, and other subjective factors. The phenomenon of the value of the dollar having an inverse relationship with the stock market is more of a temporary side-effect, than it is an accurate indicator of the overall economy.

In a good market, the price of the dollar may not really matter. We have now entered more of a global market, so there are always more options for companies to expand their range. On the other hand, if your economy is weak, then a strong dollar does not help any. If you can’t manage to do anything within your own economy, then at least you need to look good for international plays.

http://thewildinvestor.com/usd-vs-dow/

I didn't say the dollar was affected by the stock market; but the market is affected by the dollar.

The reason this is true is that US stock markets are priced in dollars. Because of this it is an unalterable fact that the index number is affected by the value of the dollar.

The value of the dollar can itself be quantified against a basket of other currencies (and/or commodities); the popular measure is the dollar index (DX). At the moment the DX is at about 75. 75 what, you may ask? It doesn't really matter what we call the unit of measurement, as long as we're consistent, so let's call them basket units. Our dollar is worth 75 basket units.

Since the index is priced in dollars, we can calculate its value also in basket units. The math looks like this:

(market index value in dollars)*(basket units/dollar) = market index in basket units

If we control the value of the dollar - and by policy we do - we can therefore make the market index go as high or low as we please (bounded by zero and infinity, exclusive). However, since we do not control the value of the basket units, we cannot control the market index in those units.

If we then look at the market index in basket units our value is 10,000 dollars* 75 basket units/dollar, or 75,000 basket units.

Since we control the dollar in this scenario, let's strengthen it; let's say we make it 100 basket units. (Since we're looking at a single point in time, the market value in basket units is fixed.) What happens to the index then?

75,000 market index in basket units * $1/100 basket units = $7,500 index.

See how we just took 2500 points off the index merely by strengthening the currency? It works the other way around, too. Let's set our dollar index to 50 and see where the market index priced in dollars goes:

75,000 market index in basket units * $1/50 basket units = $15,000 index.

Wow! We pushed the DJI to 15,000! Looks impressive... until you realize that there is no net value change, all that happened is that we priced it in less valuable units.


When you take a look at what is actually happening to the dollar's value, we can see that the market hitting $10,000 is not at all a positive thing, and in fact is a major warning sign that our national currency is being systematically (and, I should add, deliberately) devalued.

definitely is legally manipulated by Market Makers, Fund Managers, Pit Specialists, and others who buy and sell large blocks of stock on a daily basis. They attempt to hide their transactions by splitting their buy/sell orders among several different routes and exchanges, but you can spot them if you know what to look for.

lecture, but in this "global market," the day-to-day value of a single currency has little true relationship to the US stock market. I fully understand your reasoning, and how the dollar is "valued," but the market plays by its own set of rules. The subjective expectations of traders and investors has much more to do with market direction than does today's "value" of a given currency, equity, or derivative.

That the Dow crossed the 10K level is nothing more than a psychological reference point which has created an area of perceived "support." Should that support area be broken, it will become a resistance area. If investors and traders choose to adjust that 10K support area to its "actual value" of 7.5K, it would make little difference to their immediate buying and selling strategies.

A natural catastrophe, an outbreak of war, if Bernanke gets a cold, a new medical discovery, a change in interest rates, or any number of events can drive the market to new lows or highs with little regard for the value of the dollar.

If I were holding gold right now I would sell it and buy stocks.

and occasionally swing trade stocks, so the DJIA hitting 10K is just another technical indicator for me. I made approximately the same amount of money on a daily basis when it was below 6500. It was actually more interesting to see the S&P500 go above 1080. Long-term (core) investing as a strategy is no longer viable for most serious traders.

Thanks for admitting that. It is why I am no longer in the stock market.

my thoughts in 2000-2001 was that we could see another period such as the 60's, 70's and early 80's where we went sideways for a number of years. If one could position themselves to take advantage of some of the peaks and troughs they would be in a better financial situation from those who just bought and held.

Good luck!

:hi:

with a 0.10 stop is my idea "investing"...;-)

just guessing a gap of some sort???

"playable void" by some technical analysis methods, is the absence of a nearby, or meaningful, level of support, or resistance. A group of 3-5 bars which move smoothly down without overlapping, create a "playable void" to the upside of at least 60% of the move down. It's the opposite for an up move, and a short opportunity. If the bars overlap, or are vastly different in range, then a level of support, or resistance is formed. The levels of nearby support or resistance may indicate where people have become "trapped" and are waiting for an opportunity to "get out even" (which may call for a "contrarian" play).

The same principle applies regardless of the time-frame you are looking at (monthly, weekly, daily, hourly, 15-, 5-, or 2-minute chart). There are also many variations of this particular "setup."

been many opportunities in the last decade... but it is not easy.

:)

easy, but with some training, and the will to go through the often painful "experience" period, day trading can be a profitable occupation. There is no "secret," except for gaining the ability to interpret other people's pain and greed (read the bars), and a solid money-management plan. I know many people who have developed an 80% win-rate on trades. Even a 60% win rate with a good money-management plan will make you money over the long run.

need to shuttle kids to various locations I wound up pretty much spinning my wheels. But I learned something, picked up Edwards and Magee among other books, read a variety of trading/investing sites and learned to tinker with my Tradestation charts. Eventually decided to concentrate on the larger retirement funds instead of the smaller amount in the trading account. Not regrets whatsoever for the time spent learning something about TA.

It is not for everyone, but I agree it can be profitable for those willing to invest the time and for people who can stick to their plan. Many do not succeed, it is hard work trying to take some profits from the big boys. :)

read, over 90% of those who attempt day and/or swing trading crash and burn. Luckily, I read that stat before jumping in blind and ignorant. I read everything I could get my hands on, and finally spent a few bucks with Greg Capra and Oliver Velez of Pristine Services on hands-on training. Oliver and Greg have since split up, but Greg still runs a great training program, along with Ron Wagner.

I spent about a year and a half "paper trading" and training before I began active trading, and felt confident enough to retire. I've never regretted the time spent in preparation.

Take care, and good luck to you...;-)

Bill

and built a solid foundation before jumping in too quickly.

Congratulations and you take care as well.

:)

For one thing the Dow doesn't take into account dividends paid on the stocks. More important, inflation is more than compensated for by the long term increase in value of stocks. For instance, when I started to invest, in 1982, the Dow was 1200. Now 10,000. Inflation pales in comparison. Retired in '88 and haven't added any income to investments since, but still living comfortably with 300% increase in net worth since retirement. Ignore investing at your own peril.

you in 1982, may not necessarily work for an investor today. The climate has changed considerably, and the era of slow, but steady growth has given way to turbulence due to mergers, takeovers, bankruptcies, foreign market influences, energy and oil uncertainties, and other market forces which were not as common before the Internet bubble of the '90s.

Warren Buffet, and almost all other heavy investors, lost billions over the past year and a half, as did anyone else who was foolish enough to hold new investments for the long term during this period. Now that the market is heading back up, there is no guarantee that there will not be many more corrective "aftershocks" (and volatility) in the coming months and years.

Having said all of that, there are most likely still some good long-term investments out there. Finding them would be the problem, as no one has a functional crystal ball -- not even Warren.

over that time period.




The chart may not account for dividends (only 11 Dow stocks pay dividends higher than 3%), but it also doesn't account for all of the manipulation that goes on with the Dow component stocks.

If you want to talk inflation, here are some more comparisons:

Dow 10,000 in 1999 was worth about 22,935 pounds of lead, but now it is worth about 9615 pounds...a 58% decrease.

In terms of oil, in 1999, at the time a single share Dow Jones Industrial average was worth about 650 barrels of oil, Oct 2004 it was 188, and now it is 132 barrels.

Oops.. so much for beating inflation!

great year to invest, 1966 not so much.

It's cheaper to buy US goods than to go anywhere else. Yes, a sinking dollar is bad as far as our purchasing power abroad, but a cheap one means increases in tourism and American companies and workers can underbid foreign competitors and still make a profit. This has happened in the past...the late 70s and again in the early 90s...each time the cheap dollar helped spur the end to recessions as investment in the US was profitable and it will be again.

Count me among those who think a little inflation and currency devaluation is exactly what we need right now. So the increase in the DOW is partly illusion?

I don't understand why so many here seem to undervalue the very hard job that Obama has accomplished of at least restarting the engines and stopping the boat from taking water.

Cheaper dollar will bring jobs, and why don't people get that?

I really think many here like to wring their hands...the natural aversion to thinking the worst rather than trying to take a deep breath and get a wider view. But heck...that's also what makes DU fun...a little outrage isn't such a bad thing.

That said, I totally agree on how well President Obama has done to stop the slide. The bank bailout for all its negatives stabilized the economy that was in free fall on the verge of total collapse. IMHO the market is flush with "stimulus" dollars that are going to replenish many of the porfolios of those who will invest in the real recovery, but that's not much consolation for someone out of a job and having problems making ends meet. I'm hopeful the predictions of the recovery working down to rebuilding the nation's infrastructure and economic/consumer base that will mean a true recovery.

Restoring sanity to 30 years of capitalism run amok doesn't happen overnight. I'm grateful things didn't get any worse.

Cheers...

That's true across the board.

Your touting of gold is misplaced. Yeah, it's high right now, but it won't stay there. It will come back down.

You could have done better by buying Euros or Canadian dollars, than buying and holding stocks in the stock market, but that's if you buy a share and hold it the whole time. You should get into and out of stocks as you perceive their value to move, both short and long term.

If your imaginary stock market investor had gotten in at 10,000 on the DOW, out at 13,000, and back in at 7000, he would be sitting on a bonanza in the stock market at 10,000 right now.