RE: Dow hits milestone 11,000

Seriously? Seriously? You don't see why that is comical? Are there any logical processes going on up there at all?

Here, I numbered them for you to make it easier.

(2) + (1) => not (3)

Now, my dear lad, please try to think before posting.

Can you explain to me how the factors that you've mentioned in this thread equate to the dow hitting the round number of 12,000 at year-end? What's the math behind it? Why not Dow 11,800? Or Dow 12,300? How do you come up with 12,000? Just curious as your so certain that the Dow will hit 12,000....surely you've done some real calculations to come up with that number?

depends on what money market accts are yielding. in the early 80s when inflation was low double digits, money markets were yielding 15% and people were certainly not buying stocks.

Autistic license wrote:

Rudi, why would investor be in cash if they fear inflation? Stocks would be better.

Rudi Voeller wrote:

Not necessarily. If the bond market is selling off on fears of inflation than the stock market could very well sell-off. Again - go back to 1994. The bond market got murdered and stocks finished the year with a loss. There are other places for investors to put their money than the stock market or bond market. Oil, gold, cash, high yield bonds (which do not directly track to govn't bonds), etc

question question wrote:

Can you explain to me how the factors that you've mentioned in this thread equate to the dow hitting the round number of 12,000 at year-end? What's the math behind it? Why not Dow 11,800? Or Dow 12,300? How do you come up with 12,000? Just curious as your so certain that the Dow will hit 12,000....surely you've done some real calculations to come up with that number?

There is no math in short term stock market predictions - it's all animal spirits. Stop needling when you know there is no equation to be presented.

It's a prediction that's all.

As far as I can tell, there are two ways to predict future 5-10 year stock market performance:

1) the past ten years

2) valuations

since the past ten years have been so-so, we should be in for a nice but not rip-roaring next 10. (don't just look at the SP500 - small cap stocks have done pretty well - 6%/yr for last 10 years)

And valuations are also so-so. So that suggests also a nice next 10.

Something like 8% per year is reasonable for the next 10 years.

So

look at Japan. That's where we are headed.

http://finance.yahoo.com/echarts?s=

^N225+Interactive#chart2:symbol=^n225;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

question question wrote:

Can you explain to me how the factors that you've mentioned in this thread equate to the dow hitting the round number of 12,000 at year-end? What's the math behind it? Why not Dow 11,800? Or Dow 12,300? How do you come up with 12,000? Just curious as your so certain that the Dow will hit 12,000....surely you've done some real calculations to come up with that number?

Economists are predicting and charts are predicting a range of 12,000-12,500 by year end. So, I'm predicting the lower number. Really not much more than that...other than my own research tells me that the economists who are predicting that range have a good reason to do so. But, it IS just a prediction after all. I will either be wrong or right. Trust me that I will sleep well either way.

Well, inflation isn't low double digits right now, and as a result neither are CD rates or Money Market accounts. I've long said here that if CDs go back to 12% like they were in the 80s, that's where I'm putting my money...at least most of it.

Rudi Voeller wrote:

depends on what money market accts are yielding. in the early 80s when inflation was low double digits, money markets were yielding 15% and people were certainly not buying stocks.

Autistic license wrote:

Rudi, why would investor be in cash if they fear inflation? Stocks would be better.

Lekuta wrote:

I have yet to meet a single human being that has "fallen from the Middle Class to poverty"... stop the fearmongering.

The U.S. economy lost 95,000 jobs in September, far worse than expectations for no change in employment. More Census-related temp jobs ended, as expected, but state and local governments slashed staff far more than predicted.

So far in 2010, the U.S. has added just 613,000 jobs — for a monthly average of 68,111.

Employment bottomed in December 2009 at 129.588 million — two years after peaking at 137.951 million. At this year’s pace, the U.S. won’t recoup all those 8.36 million lost jobs* until March 2020 — 147 months after the December 2007 high.

That would obliterate the old post-World War II record of 47 months set in the wake of the 2001 recession.

The current jobs slump also is the deepest of any in the post-war era, with payrolls down as much as 6.1%. They are still 5.6% below their December 2007 level.

With state and local governments likely to shed workers for at least the next year or two as budget woes continue, the hiring burden will fall entirely on the private sector.

Private employers did add 64,000 workers last month, but that was a little less than consensus forecasts and far below what’s needed.

The U.S. needs to create 125,000-150,000 jobs each month just to absorb new workers and prevent unemployment from rising. So returning to the old peak employment a decade later would hardly suggest a healthy labor market.

(Unemployment held at 9.6% last month as the separate household employment survey reported an increase in jobs. But the underemployment rate rose 0.4 point to 17.1%, matching the 2010 high.)

The bottom line: It’s quite possible that the next recession will hit before the U.S. returns to old employment highs.

*The Labor Department said employers may have cut 366,000 jobs more than previously reported in the year through March 2010. A final estimate will be issued in February. That suggests job losses were deeper than expected in 2009 and/or early 2010 hiring was weaker than previously expected. Both would suggest an even-longer return to full employment.

That's interesting because if you go on cnbc or read the wall street journal you would see that the analysts predicting dow 12,000 at year-end are in the minority. Not sure who these economists are that you're alluding to......Oh and I'd love to see these "charts" you are talking about....most analysts are not so bold as to predict a 10% gain in the market in one quarter.One final point.....no one cares whether you will sleep well or not.

Flagpole wrote:

Economists are predicting and charts are predicting a range of 12,000-12,500 by year end. So, I'm predicting the lower number. Really not much more than that...other than my own research tells me that the economists who are predicting that range have a good reason to do so. But, it IS just a prediction after all. I will either be wrong or right. Trust me that I will sleep well either way.

its funny when you actually list out your reasons for why the market will go up its easy for everyone to see how completely ignorant and stupid you are. lets summarize your reasons:"continued growth in manufacturing for 14 months" - that's already been priced into the market since it already happened"home prices have risen for 5 straight months" - again - that's a backward looking indicator. already priced into the market"personal income and spending is up" - also backward looking and priced into the market"an undervalued stock market" - you are probably the only person out there who believes that the market is undervalued. the s&p is trading at a multiple of 17. given the expected trend in the economy and in corporate profits over the next 12 months its hard to argue stocks should be any more highly valued than the are"Buffett saying that stocks is the place to go" - that's great but its one person's opinion. also, Buffett doesn't say anything about dow 12,000"charts show a dow of 12,000-12,500 is in the cards by the end of the year" - i'd like to see these charts. can you share them with everyone on here?"many companies are reporting decent sales and trending up" - we know corporate profits are rising and expected to rise in 2011 but not at the level to support the gains in the stock market you're talking about in such a short period of time.care to come up with any viable reasons for your prediction? other than 12,000 being a round number and you are wearing your pom poms cheerleading for the stock market.

Flagpole wrote:

...as it had to eventually on its way to 12,000 by the end of 2010 as I have predicted.

Here's hoping you've got money in the market...going to fun to see near term (even though I'm still a long term guy).

WOW! You are Da Man!

I dunno what I would do without you... I'm going all in now!

Oh... wait... that was over a decade ago...

http://www.nytimes.com/2006/01/10/business/10stox.html

The Dow first broke through 11,000 in May 1999. Now, nearly seven years later, those days may seem like a lifetime ago to investors: then, the Internet was the future of all business and a terrorist attack on American soil seemed unthinkable.

http://www.msnbc.msn.com/id/10777541/

On Monday the Dow finally closed above the 11,000 level for the first time in more than four years, clawing its way back to a level last seen before the terrorist attacks of 9/11, before the war in Iraq and before the spate of corporate scandals that began with the collapse of Enron.

...good thing I learned how to trade and not just buy-n-hold.

You are not correct.1) Manufacturing is a leading indicator as defined by some or at worst a coincident indicator. The market doesn't go lock step with it though, and bad sentiment in other areas can negate a leading indicator. I mentioned it though because eventually continued progress for 14+ months eventually can't be ignored, and I've decided the time frame for that is end of 2010. If you go with it being a coincident indicator, then any move upward monthly then affects the market at that point. It is trending up, so...2) Home prices continuing to rise is trending up and, if you'd ask the average Joe on the street, they wouldn't know prices are trending up, so that's GOOD as far as my prediction goes (because eventually they will realize this, and again, I predict enough will know by end of 2010 for it to make a difference).3) Personal spending and income is a coincident indicator, NOT a lagging indicator!4) I am absolutely NOT the only one who is saying the market is undervalued right now...not even close.5) While Buffett is just one person, he is still the most respected and followed investor on the planet, and when he says to go to stocks and out of bonds, LOTS of people heed that advice. You are correct that he didn't predict 12,000 by the end of the year...that's MY prediction based on several things including Buffett's call to move to stocks.6) What you are talking about with regard to companies and their profits is just YOUR OPINION that there's not enough there to support a Dow of 12,000 by end of 2010. First of all, when EVER did company profits NEED to be at a certain point to support a certain level of Dow? Secondly, I didn't say the Dow of 12,000 would be completely LOGICAL only that it would BE. Another point here though is that as the stock market IS a leading indicator (you seem to need some education on that), it is VERY conceivable that the market could be up higher at a certain point than is warranted AT THAT POINT IN TIME, because it's all based on what investors THINK will happen 6-12 months later.So, what's going to happen is that the Dow will hit 12,000 before the end of the year, and some of you will say I was lucky or that it only happened because the government did this or the elections turned out this way or this or that. Well, I've already factored in all the possible things that will likely affect this market, and I say Dow 12,000 by end of year.It's just a prediction. I'm one who always says it's not an exact science, so the Dow might take a little longer to get there (though I'm predicting end of year 2010), and as far as my own investing goes I could not care less...I still have as much as 15 years left to go before I need that retirement money (perhaps less).

Please ban this idiot...

Flagpole, the market is indeed extremely undervalued right now. However, corporations are not acting in an equity friendly manner. They are cleaning up their balance sheets and hoarding cash instead of investing, buying back stock and increasing dividends. This makes debt look extremely attractive, but not equity.

That being said, with debt yields at such extremely low level investors are searching for yield. Companies that have dividends yields in excess of 5% look extremely attractive and will outperform the market.

My point is that you can not generically say that the market is undervalued and therefore you should invest. Yes, everything looks undervalued by historic standards but this is not a standard market. If you want to invest in stocks (I am in full disclosure) you need to be looking at stocks relative to bonds. What is the current income they offer. Buy stocks with attractive dividen yields.

This is actually a good post, even though I don't buy everything from it.

I keep myself well diversified so that I always have some portion of high dividend-giving stocks, but I'm not one to load up in one sector or one type of stock...this strategy has served me well over the years.

I do agree with you that this is not a standard market. We're still in a bad place, but we ARE on the upswing and have been since March 2009 (for stocks) and June 2009 (for GDP growth). Always better to be in than not as 73% of years are up years.

You are not very smart. The reason the stock market is rallying is because investors view a new round of quantitative easing by the Fed to be very likely. Hence the rise on the market on Friday's weak jobs report. The belief in more quantitative easing is also what is driving the rally in bonds (if the govn't is buying bonds than the price of bonds will go up). If bonds stop rallying that means the market is dissapointed with the level of quantitative easing and stock market would correspondibgly sell off. Do you even understand the current relationship between the stock market and market?

Flagpole wrote:

No, you are incorrect. Buffett has talked of a bond market collapse and that stocks are where to be right now. Do you read anything on a daily basis at all? The vast majority of analysts right now are saying the market is under valued, and many are pulling back on previous gold predictions of $5,000 an ounce within 2 years...WHY?...because people are going to go back to stocks. We still haven't recovered to where we should be following the crazy decline in 2008. When the Dow hit 10,500 for the first time in 1999, the GDP was about $9.25 trillion. Today, with the Dow even higher than that (11,000) the GDP is just under $13 trillion. It's under valued brother. Believe it.

++++++++++++++++

Bill, come on. Is "the reason the stock market is rallying" just one thing? One thing? 3 billion shares moved today on the NYSE and all traders were thinking one thing and one thing alone! quantitative easing!

One thing I like about flagpole is that he doesn't make assertions like that. He takes in many factors and makes a decision.

you...read too much of the financial press.

Flagpole wrote:

Economists are predicting and charts are predicting a range of 12,000-12,500 by year end. So, I'm predicting the lower number. Really not much more than that...other than my own research tells me that the economists who are predicting that range have a good reason to do so. But, it IS just a prediction after all. I will either be wrong or right. Trust me that I will sleep well either way.

Well, here is another viewpoint about the stock market's valuation and direction. I know you will never acknowledge that you have anything to learn from anyone else - but you should at least consider other perspectives once in a while.

Personally, I think the strategy of buy and holding most of a portfolio in index funds makes no sense in today's market. Why spend 30 or 40 years gradually accumulating wealth and then squander the opportunity to maximize the returns of that investment. But to each his/her own.