13,000 - No Big Deal. Wake Me When the Dow Passes 14,000

By
Education & Training with REAZO

"stock market, dow jones, 13,000Memory is deceptive because it is colored by today's events." Albert Einstein.

 

THERE IS A LOT of chatter today about the Dow Jone Industrial Average climbing back above 13,000 as it briefly did last week. For many, it is a sign the economy is coming back, that good times are returning.

After all, times have been tough. But what we need to remember is that the last time 13,000 was a milestone, the Dow was dropping through it, not climbing above it. The stock market is graphic proof that what goes up can indeed come back down.

So, perhaps again reaching 13,000 is reason to breathe a sigh of relief and is cause for optimism. But let's keep it in context, let's remember we've been here before. Let's not forget the number of people still out of work or the number of houses still underwater. And let's remember the Dow represents just 30 companies and is far from being a general indicator of the larger economy's health.

In 2007, the Dow broke 13,000 for the first time while on its way to an all-time high of 14,164. That was more than four years ago. Then, the Dow began dropping dramatically to reach a low of 6,547.05 in 2009. We have been struggling to gain back lost ground ever since.

Despite recent gains, a significant amount of lost ground remains between us and that high. So in many ways, 13,000 just marks another marker on how far we remain behind the curve - 1,164 points to be exact.

 

THEY SAY one shouldn't buy stocks on a knee jerk reaction, that they should be viewed as long-term investments. If that is true, then we are talking very long term. For those who held Dow stocks in 2007, five years have passed with investors seeing a loss from the high. Regardless of what happens next, more time will pass before we again are breaking even.  

Yes, be excited the Dow is on its way back. Let's just remember it isn't all the way back yet. And no one is predicting when we will again be setting new highs as the Dow continues its VERY long-term trek back to where we once were.

Grant Sasek works for Real Estate Pipeline, an on-line lead generation service.

 

 

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Comments (2)

Bud & Beth McKinney
RE/MAX UNITED - Cary, NC
Cary/Raleigh/Apex NC - The Team That Cares, RE/MAX United

So much  is already a Long Way from where it once was, but having it even Start to get back there is a good sign indeed.

Feb 27, 2012 04:00 AM
Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi Grant - It should be evident by now that the Dow is nothing more than a tracking index of the behavior of speculators and has no real linkage with the underlying health of the economy. If you're concerned about a recovery, watch data like unemployment, manufacturing orders, housing starts or dozens of others that measure real meaningful activity. The Dow has no more business being at 13k right now than it did being at 9k three years ago.

Feb 27, 2012 04:11 AM

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