May 12, 2006

Dow Is Near Record. So?

Filed under: Economy,Taxes & Government — Tom @ 9:19 am

This entry was posted just before the market opened on Friday.
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Even after yesterday’s big hit, there is a lot of excitement about the Dow Jones Industrial Average being within striking distance of its all-time high.

Please. The Dow, consisting of only 30 companies, and very large ones at that, has always been overemphasized.

Recovery from the stock market bubble will not be complete until the S&P 500 gets back to its high of roughly 1527 that was achieved in March 2000.

Given that it closed on Thursday at 1306, that’s a long haul of a bit over 17%. I think that might have happened by the end of the year had Congress “made the tax cuts permanent” (more accurately described as “make the current tax structure that has been in place for the past three years permanent”). Now I think it’s very doubtful.

As to the NASDAQ, there was so much froth in that index at its height that it’s really not appropriate to have a benchmark for recovery. So many companies that made up the index when it soared to over 5000 aren’t even around any more, or are shadows of their former ridiculously overvalued selves.

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4 Comments

  1. Right, the DJIA is meaningless. SPX is the better indicator of the health of the stock market.

    I must say though, if the economy is so good, why did gold crack $750/oz?

    Comment by Kevin Irwin — May 12, 2006 @ 9:08 pm

  2. Gold is supposed to be telling us that inflation is not under control and that interest rates aren’t high enough.

    Comment by TBlumer — May 12, 2006 @ 9:26 pm

  3. Gold also tells us that investors have concerns about the equity markets.

    Comment by Kevin Irwin — May 12, 2006 @ 9:31 pm

  4. #3, agree. It’s all interrelated with the other factors.

    Comment by TBlumer — May 12, 2006 @ 10:50 pm

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