The Dow Jones Index closed the week down 5.38% from its last all-time high of July 15th, a month ago. But looking at the Dow Jones as Mr Bear does in the BEV chart below, with every new all-time high registered as a 0.0%, or BEV Zero, and all other daily closings as a percentage decline from their last all-time high, comes short of displaying what has happened in the stock market since July 15th.
Every bull market advance eventually sees its last all-time high. No one rings a bell when it happens, but from that point on things begin to change for the worse for the bulls.
The Dow Jones’ BEV chart below begins at the -54% bear-market bottom of the 2007-09 credit crisis. We don’t see a -54% BEV value as I began this series on the March 09, 2009 bear-market bottom. So instead we see a 0.00%, as the first data point of all BEV series begins at zero percent.
Re-Blogged From Newsmax
General Electric, an original and steadfast component of the Dow Jones Industrial Average for over 110 years, may get the boot.
Deutsche Bank analyst John Inch wrote in a note to clients that the illustrious index could remove the manufacturing conglomerate as its challenges accumulate.
In the last 50 years, prices have gone up around 20 times. Aside from the obvious fact that the FED’s printing of new Dollar Bills out of nothing has stolen 95% of the Dollar’s value, I find it interesting when I consider the Dow Jones Industrial Average.
Around 50 years ago, the Dow approached the 1000 mark for the first time. (I recall seeing a Broaway show “How Now Dow Jones” which used Dow 1000 in the plot line.)
But, the Dow couldnt make it past 1000 at that time. It pulled back by 25% and made another run in ’69, but still it fell back – way back.
The Dow made another 3 tries – and even made it 7% above 1000 before the Recession in 1974 – but it wasn’t until 1982 that the Dow finally broke above 1000 for good.
That was 16 long years that the Bulls had to wait. If a market player had invested all he had in 1966, it took him 16 years before he could start to make a profit.
Of course, the CPI kept going up, so Dow 1000 in 1982 wasn’t worth nearly as much as Dow 1000 was in 1966!
If we consider today’s Dow 20,000 – after prices have run up 20 times – the stock market looks very similar to 1966 with the Dow at 1000.
Except that today:
- The FED has been printing Dollars for the last 10 years at a much faster pace than it did between 1956 and 1966.
- The PE Ratio today is around 50% higher than on the Dow 50 years ago.
- The stock buybacks of today, with their manipulative effect on earnings, were only a twinkle in corporate officers’ eyes in 1966.
- The Dollar still was “As Good As Gold,” and was 3-4 times the value in 1966 to other currencies compared to today, even after the recent run up.
- The numbers coming out of DC for such items as Prices and Unemployment were reliable back then, as opposed to the laughable fictions they are today.
So, I guess maybe today’s Dow 20,000 is a bit overextended compared to Dow 1000 in 1966. In 1974, the Dow fell around 50% peak to trough.
But if the Market and the Economy are not in as good shape today as in 1966, then maybe the coming fall from grace will be much bigger.
Do I need to say, “Look out below?”
The Stock Markets often predict the outcome of Presidential elections. If stocks are up – or even if they just are flat – the party which holds the White House tends to win the election. If stocks are down – especially if they’re down big time – the opposite party is favored to take the day.
The Dow Jones Industrial Average has been in the 18,000 area for the last two years, and as the US Economy has stagnated, the PE Ratio has gotten up to a near bubble level over 25. This has been achieved single handedly by the FED, which except for last December’s hike, hasn’t raised rates for 10 years, keeping them near zero for several of those years.
By Sol Palha – Re-Blogged From http://www.Silver-Phoenix500.com
Doctor copper, can no longer be viewed as a leading indicator, in fact, a name change might be in order. A change of name from Dr Copper to deadbeat copper might in order, given its dismal record over the years. After the financial crisis of 2008-2009, the economy, the stock markets and copper parted ways; while the markets and the economy trended higher, copper plunged into an abyss, and it is still trying to find its footing.
All Jokes aside, the reason copper is diverging from the markets is because the Feds destroyed the concept of a free market system long ago. Copper is indicating that this economic recovery is nothing but an illusion. However, several rounds of QE, plus interest rates being held down for a record-breaking period, have altered reality. The markets are moving higher because of hot money, and the economic miracle would end without the low-interest rate band aid. Against such a backdrop, copper ceased to work. In this environment, fundamentals and basic technical analysis can lead you astray; in such an environment Mass psychology works the best. The masses have accepted that Fed intervention is the new norm and that the Fed is the saviour. Hence, this is what investors need to pay attention too, as the psychology of the masses is what drives the markets. Given the old historical pattern between, copper and the markets, the stock market should have followed copper into the abyss, but instead we find that several indices are dangerously close from putting in new highs.
[I’m on vacation this week with my family, including grandkids, and I’ve just located a WiFi hotspot.] The US stock market has been down the last couple of weeks. With the Chinese market losing 9%(!) yesterday, and the US market down 367 more points as I write, it looks like the US downturn may continue to correct from the market’s unsustainably high levels. A “Mean Reversion” to more normal PE levels of 14 could lop off another 6000 points from the Dow. Mean Reversions seldom stop at “Normal Levels,” so an eventual drop over the next couple of years, to Dow 7000 or so, is not out of the question.