Tuesday, November 27, 2007

The March to 10,000

News that Citigroup would receive a cash infusion from the Middle East helped spark a stock-market rally Tuesday, as did a break in the price of oil.

The Dow Jones Industrial Average rose 142.50, or 1.1%, to 12885.94. The S&P 500 added 13.80, or 1%, to 1421.02, and the Nasdaq Composite Index gained 33.77, or 1.3%, to 2574.76.
I read an analysis in Slate or somewhere* about the time that the Dow Jones Industrial Average passed 10,000 that it would stick there for a while. It had stayed at 100 and 1000 for inordinately long times, so powers of ten seemed rather sticky. Even though a lot of 'psychological' arguments about market movements are bunk, the idea appealed to me and I was fully prepared to watch that happen.

It didn't.

But, I am spectactularly prone to idées fixes. So, I've been expecting the Dow to relax back to 1E4 for 2 years now -- it was last within, oh, 216 points at open on October 17, 2005, and first on December 1, 2003, so it only spent 22 1/2 months there. The theory predicted it would be more like ten years. So, six years from now? Dow 10,000.

* -- actually, if you could find that? That'd be stellar.


nephos said...

Uh, you mean 1e4?

Sounds reasonable. Though my bet is even at 1e4, real value will decline much lower through stagflation. As oil prices rise, the value of all associated infrastructure (pretty much everything given the importance of transport to the economy) must correspondingly decline.

My bet is on nukes and electric trains.

Rionn Fears Malechem said...

Yes. Thanks for the correction. Stagflation is definitely in our future. I expect some companies to start building nuclear plants and fail to see them completed by _other companies who take advantage of inexpensive, mostly finished nuclear power plants at firesale prices. So, it's hard to invest around that.

nephos said...

Agreed, though GE supplies parts regardless, and the raw material suppliers and waste disposers have effective monopolies on their ends. My money's in Cameco and EnergySolutions.