OPEN THREAD: Dow 12,000
By Barry Ritholtz - January 26th, 2011, 7:00PM
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Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
January 26th, 2011 at 2:05 pm
yhoo, life is now good, thank God Obama delivered the ball over the goal line to hit that magic 12K !!
sarcasm off
The market is skating on thin ice, FED blowing new asset bubbles in equities and commodities; fiscal deficits fueling the debt impulse pumping the bubble and Obama proposes more spending – er investment – and to freeze the discretionary budget (only after raising it over the last 2 years) pushing the deficit to >$1.5T. Does anyone else see any problems here ?
January 26th, 2011 at 2:11 pm
All very well but shows the weakness of the Dow geometric weighting…top 5 Dow stocks are 33% of the index….same 5 are less than 5% of SPX. It’s also very overweight energy & export industries. Psych barrier but not really an indication of overall health.
January 26th, 2011 at 2:11 pm
Yep, if by “thin ice” you mean — “fantastically strong balance sheets and earnings growth”.
Also, by “thin ice” you must mean — “continually stronger than expected GDP growth, earnings growth, and imminent accelerating payrolls growth”.
I BUY when you sell into the “thin ice”.
January 26th, 2011 at 2:11 pm
I’ll bet ya it goes higher. Or lower. higher and lower. Definitely one of those.
January 26th, 2011 at 2:16 pm
How fast to Dow 13,000?
How fast to SPX 1,400?
I bet on pretty fast… put the over/under at 3 months. Econ data looks like it will be a big push positive again in early Feb.
January 26th, 2011 at 2:19 pm
It’s all Obama’s fault!!!
Sorry, I probably should have put some misspellings in there to make it more like a wingnut posting.
January 26th, 2011 at 2:36 pm
I think the SOTU write off by folks at the Davos conference was not a good sign for the markets overall and the 10yr Treas. yield seems to be hanging around 2009 rebound levels. Broader market volumes, volatility and betting (aka hedging w/puts,calls) seem to be signaling a possible short-term drop sometime in the next month. Maybe? Forecasting is just a lot of hand-waving really. Nevertheless, we’ve used the peak we’re at now to get out and wait for upcoming dips/drops if any. Worst case is that we’ll miss out on a few percent rise if I’m wrong. Best case, this will be similar to the April 2010 drop and subsequent recovery.
January 26th, 2011 at 2:38 pm
Time to dust off the Dow 13,000 hats.
January 26th, 2011 at 2:42 pm
* Prior to the last Dow 12000 close (June 19, 2008 at 12063.09), the Dow crossed that level five times. In other words, it drifted down and then rebounded to close above the level five times after first closing above that level on Oct. 19, 2006.
* The move from Dow 11000 to 12000 took 1,879 trading days – the third-longest such stretch, which is remarkable since as the Dow gets higher the stretch between milestones shrinks. From 11000 to 12000 is just a 9% move.
* The longest stretch between milestones? A whopping 21,652 trading days to get to Dow 1000. It took 3,573 trading days to eclipse Dow 2000.
* The quickest: Dow 10000 to 11000 took 24 trading days.
* A close above Dow 12000 would represent a staggering 83% gain from the 12-year low reached on March 9, 2009.
January 26th, 2011 at 2:55 pm
“Men think in herds, go mad in herds, but recover their senses one by one.” — Charles Mackay
January 26th, 2011 at 2:55 pm
looks like buy and hold works after-all.
January 26th, 2011 at 3:16 pm
I’ll wait and see what this weekend’s options expiration brings. I have lightened up in the interim. Too much smoke & fog to make decisions involving risk. If this market is immediately headed higher, I can get back on board sometime next week with only a small lost opportunity. But if it goes wacky for a week or two, and moves back toward the lower end of the trading ranges, I can get back in at a lower price point. Not losing money has a higher value to me than lost opportunities at the moment.
Taking into account the DeMark noise, and the proximity to the top of the current trading range, I’d just rather watch from the sidelines for a few days until the fog clears a bit.
If we do have a step down, I doubt that it will be “the big one”, and it will only provide an opportunity to get back in at a lower price point. I suspect that there are going to be many, many situations like this over the next few years, with the markets moving farther and farther into the Twilight Zone.
What do the Fibonacci ratios tell us?
January 26th, 2011 at 3:51 pm
I don’t see a catalyst to instigate the correction we have been hearing is “just around the corner” since summer of 2009 (remember Doug Kass’ call). The point being these things usually don’t come with warnings.
Bottom line is that we all know that the economy/country is in the shitter and it is going to get REALLY REALLY bad once municipalities start defaulting/going bankrupt.
But who knows when the hammer is going to fall.
So far Wall Street seems very content with its free liquidity from Uncle Sam. Given the rapidly increasing concentration of wealth in America today, why can’t Dow 15,000 happen if the unemployment rate dooubles.
Wealth concentration=liquidity concentration=complacent investment bankers=stupid asset valuations.
It sucks to be cynical.
January 26th, 2011 at 3:59 pm
In inflation-adjusted dollars, the DJIA would need to be something like 17,000 just to get back to where it was when President Clinton left office.
January 26th, 2011 at 4:09 pm
BR, I personally capitulated being bearish. I am long and strong. You should short now.
January 26th, 2011 at 5:01 pm
looks like buy and hold works after-all.
absolutely- if you buy and hold and wait ten years you end up right where you started-
what’s the ROR on that?
January 26th, 2011 at 5:03 pm
It’s like a Birthday, except you get to celebrate the same number more than once.
January 26th, 2011 at 6:05 pm
Assisted by bad weather and calendar foibles, the local food pantry broke its attendance record today. Roughly 3x the record when I started volunteering there 3 years ago. Good times!
January 26th, 2011 at 7:20 pm
maybe i’m just stoopid, but i bailed on the ponzi scam market in 2008 and won’t touch it again. i don’t do ponzi.
January 26th, 2011 at 7:26 pm
i sleep with my finger on the ‘sell’ button. just in case.
January 26th, 2011 at 7:29 pm
SPX 1550 soon coming IMO in mad and hysterical C wave to 2000 and 2007 highs, as The Big Churn resolves.
January 26th, 2011 at 7:36 pm
How many Treasury bonds will you be able to buy with a DOW point in a year. I say more.
Stocks are – roughly – fairly valued. Bonds are way, way overvalued.
January 26th, 2011 at 8:11 pm
So long as the National debt continues to climb, shouldn’t The Dow go higher, too? Like others say, the stock market is the final resting spot for all deficit dollars.
VennData understands bonds.
January 26th, 2011 at 8:34 pm
I have to agree with PeterR. I think the Fed pushes to the S & P to 2000 points, then we get a 25 percent correction, which drops it down to 1500 points, the highs 2000 and 2007.
January 26th, 2011 at 8:38 pm
Palladium, Palladium, Palladium, Palladium – no, nothing to rhyme with Sarah – am pounding the table to the tune of the monkeyboy dance: http://www.youtube.com/watch?v=8To-6VIJZRE
That being said, stuff settled in cash or 30-day gets more expensive vs. stuff funded by debt gets more expensive. Whatever you call it, it’s not deflation (for foodstuffs & gasoline) and it’s not inflation (for salaries & local taxes), it’s Fedflation (anyone think of this yet, if not, you’re welcome, if so, thanks).
Oh, an lookee @ SHIBOR, woo hoo! http://www.shibor.org/shibor/web/html/index.html
/end-o-rant
January 26th, 2011 at 8:39 pm
Palladium, Palladium, Palladium, Palladium – no, nothing to rhyme with Sarah – am pounding the table to the tune of the monkeyboy dance: http://www.youtube.com/watch?v=8To-6VIJZRE
That being said, stuff settled in cash or 30-day gets more expensive vs. stuff funded by debt gets more cheap. Whatever you call it, it’s not deflation (for foodstuffs & gasoline) and it’s not inflation (for salaries & local taxes), it’s Fedflation (anyone think of this yet, if not, you’re welcome, if so, thanks).
Oh, an lookee @ SHIBOR, woo hoo! http://www.shibor.org/shibor/web/html/index.html
/correct-o-end-o-rant
January 26th, 2011 at 8:56 pm
There’s no inflation–I just bought an ice cream cone at McDonald’s for 69 cents.
January 26th, 2011 at 9:01 pm
Thank goodness! Now it’s clear.
January 26th, 2011 at 9:31 pm
Can’t short anything unless you get short early, take a small profit on the morning dip and then flip long for the afternoon ramp into the close – EVERY SINGLE DAY. This market is being played in the worst, saddest way.
Was short gold a bit over the last couple weeks, that worked and agreed with my view of reality (e.g. you must short something when it turns into a #1 show on a cable channel).
Karma says this will all end badly as Bernanke sealed the market’s fate when he said the dumbest thing I’ve ever heard on that 60 minutes interview a few weeks back (paraphrasing):
interviewer: “So, how controllable is all the stimulus? How confident are you of being able to control the unwinding of all this?”
Bernanke: “I’m 100% sure I can control this.”
What an incredibly stupid thing to say for the record. The hubris is off the scale…
January 26th, 2011 at 9:55 pm
Cash going to share buybacks and M&A will keep the fire burning for awhile longer. Then, mid year, municipal defaults and preemptive austerity will send us along the path being followed by Ireland and G. Britian. My sad opinion.
January 26th, 2011 at 10:44 pm
Eye Wall: yup. However, who says that how the Fed (squids, sponges, dead handes, invisible hands, red shielded chil’ren, etc.) wants to control is in favor of what we deem, vote, and pay to be in the common interest? The Fed (et al) may be serving masters and thus able to control the operating point of the market in a way that may not meet the litmus test of keeping Joe-Six-Pack on the right level of the slippery Malthusian ladder of Hope.
January 26th, 2011 at 11:06 pm
DOW 3600 !
January 26th, 2011 at 11:39 pm
Congos says: “Yep, if by “thin ice” you mean — “fantastically strong balance sheets and earnings growth”.
True, for banks and major corporations/multinationals, including many bailout recipients. Not at all true for that lowly anachronistic artifact known as the man-in-the-street.
Cognos says: “Also, by “thin ice” you must mean — “continually stronger than expected GDP growth, earnings growth, and imminent accelerating payrolls growth”.”
Please elaborate upon your notion of accelerating payroll growth, and in which industry you feel it to be imminent. As for GDP — our national debt as a % of GDP is somewhere near 375%; adding in unfunded liabilities it’s closer to 800%. Huzzah!
Thin ice, bubble, bug light — whatever your preferred analogy, the surge in stocks is just a Fed fueled Wall St. circle jerk and shares no parallel with our broader economy.
January 27th, 2011 at 3:39 am
The news that this year’s deficit will come in around $1,500 Billion – or 9.8% of GDP – would normally take some of the gloss off this “new” record.
But not from what I’m reading here…..
January 27th, 2011 at 5:58 am
jeff in indy…..
LOL!! Me too!
January 27th, 2011 at 6:51 am
Hassett and Glassman, we’re a third of the way there!
January 27th, 2011 at 8:24 am
Sorry, I had to find some place to put this and the Open Thread seemed the most appropriate…….WHAT’S WITH THIS “IN THE MIDDLE OF THE BLOG”-VERIZON AD, BLOCKING THE READ?!?!
January 27th, 2011 at 9:24 am
Can you believe Obama cited the DOW at 12K as evidence of a job well done? Jesus H. Christ, is this dude ever clueless.
The measure of the failure of this presidency is not the level of incompetence so much as the failed potential to do great things. Much worse in many ways than the 8 dark years under Bush maladministration.
January 27th, 2011 at 9:50 am
@number2son
Unfortunately American culture is all about “what have you done for me lately”. If the Dow had been at 8k right now, people on this message board would have cited it as Obama’s failure.
So Dow 12k – Obama failure
Dow 8k – Obama failure
I’d rather have the Dow at 12k and trending higher because it means that companies will begin to utilize Cash flow on Cap-Ex which will mean employment growth. In fact it has already started.
January 27th, 2011 at 10:14 am
I doubt it, but hope you’re right MacroEconomist.
January 27th, 2011 at 11:09 am
Number2son I can only speak for my experience buried 4 P&Ls deep at a large multinational but in the last six months I’ve submitted business cases that would require upfront investment of 40% of our total sales and I expect all to be approved. Whether that’s due to the one year accelerated depreciation excemption or that we’ve been sitting on cash below our cost of capital for two years I don’t know but our main targets this year are all towards growth.
Another interesting point is the entire industial market is now constrained by bearing lead times. SKF, FAG, Timken, etc. have all doubled lead times in the past twelve months. Doubled. We had a make to order bearing from Timken jump from 16 weeks to 26 weeks since just October.
January 27th, 2011 at 12:03 pm
bulfinch –
You cannot have your own facts!
The current ratio of debt/gdp is typically cited at about 100%. (Google it. You’ll find a dozen links quickly).
However, about $2.5T of this “debt” is just owed to the social security trust fund… so this is debt we owe ourselves. (Another $1.5T is held by the Federal Reserve). So a more proper accounting of “outstanding debt” in terms of bonds of the US govt is more like 70%.
This is only moderately high by historical standards and with ultra-low rates our “debt service cost” is very very low by historical standards.
The “unfunded liabilities” thing is just a scam. If we look out 200 years… its $100T… if we look out 300 years… its $500T. This is just a meaningless statement. Do you fund your families life out 100 years? Are you worried about this?
One of the DUMBEST concepts ever created.
January 27th, 2011 at 11:00 pm
Cognos:
I’m late to this, and even though it’s bound to get lost in the ether, I feel compelled to respond:
First, do the Debt to GDP numbers you Google include the nearly 14 trillion dollars at risk in the ongoing bailout bloodletting?
http://www.sourcewatch.org/index.php?title=Total_Wall_Street_Bailout_Cost
As for the unfunded liabilities concept=scam/DUMBEST concept ever: maybe you don’t care, but you’ve just boiled Marc Faber down to a dumb scam artist, as he is one of the more vocal advocates of this ‘concept.’
http://hayekcenter.org/?p=3465
Even if Free Market economics isn’t your cup, there’s some interesting material in the above piece.
Finally, you can’t actually compare home economics to the National Budget, can you? There is no comparison. One’s a trip to the 7-11 and the other is a mission to Mars.