For those of you who own blue-chip stocks, this is an eye-opening prediction. An article at CNBC.com talks about the possibility of Dow 10,000. Dow 10,000!
I repeated that in case you didn't get it the first time. It sounds pretty scary to me, and it should sound pretty scary to a lot of you out there. I'd have to presume that most investors don't use the stock market primarily as a substitute casino for the times when Las Vegas is out of reach. Many of you out there must own a Disney (NYSE: DIS) or a Coca-Cola (NYSE: KO), maybe a General Electric (NYSE: GE) or a Microsoft (NASDAQ: MSFT), something generally considered core and safe for the long-term. I happen to own the first three. Anyone who does is in for some huge volatility if Dow 10,000 comes along.
Actually, whether it comes along or not, volatility is here to stay. And here's the thing about the Dow 10,000 prediction: it isn't so farfetched on a mathematical basis. When you first read that number, you say to yourself "No way, that would be like a depression!" But because the numbers are getting higher, the actual point moves aren't as dramatic as they may seem on the surface. If we hit 10,000, that would represent a decline of approximately 29% from the high reached back in October 2007. As I write this, the Dow is about 20% off the high. Is another 9% feasible?
It sure is. As the article mentions, John Carter of Trade the Markets makes the prediction on the Dow and says that "a trend is a trend until it ends." What I think is most disturbing about the current state of the markets is that, when a stock like GE is approaching a 5% yield (it currently yields about 4.6%), then a 30% decline in the Dow seems entirely possible. GE is the stock I am watching as one measure for determining when the bear market may finally turn. As long as it stays above 4%, investors and traders alike will need to remain on top of their game.
Now, as for me, I'm not so sure I buy the Dow 10,000 prediction just yet. Dow 11,000 is probably a given at this point since the summer is undoubtedly going to test the patience of many. But with oil so high, and with consumer confidence in need of an uplift, I think the "oil bubble" (assuming you believe it's a bubble) will pop sooner rather than later. If that does actually happen, then we may be safe from Dow 10,000.
So count me skeptical on Dow 10,000. There is no one on the planet who can predict future stock prices, but at least at this point, even though I am bearish on the Dow, I'm not that bearish.
Disclosure: I own Coke, Disney, and GE. Positions can change at any time.
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Reader Comments (Page 1 of 1)
7-02-2008 @ 4:03PM
winslow said...
As bad as the economy is... and it is getting worse; what is most frightening is the lack of leadership from Washington. The President's ideology prevents him from taking action (a deer in the headlights eventually is killed), Congress is not definitive in it's decisions, Obama and McCain send out soundbites but little else (they both should be in Washington leading us out of this quagmire). Even if there is a miracle and we get through this, the long-term direction of the US is decidely downward.
7-02-2008 @ 4:08PM
william lindblad said...
Mar 28th 2008 3:37PM
Hmm! I don't think anyone is going to listen and I really hope that I am wrong ,but I think the 10,000 mark is coming - maybe less. I predict late July-mid Sept. I expect a major economic impact in that time frame and it is not on anyone's radar at present.
The above was posted to blogging stocks way before CNN got the idea. Note date.
I still think that there will be something of note that will make 10,000 (-) are sure thing.
Probably a hurricane in the gulf that will send oil above 150 . Even if it does not, the rest of the woes will push it well below 11,000.
7-02-2008 @ 4:11PM
Steve in Denver said...
Damn the internet!! When all we had was print and TV, the plethora of "experts", and pundits, and "forecasters" was enough to drive anybody nuts. Now the net allows any *#@^! idiot to bloviate hysterically on how bad thing are, or aren't, or will be or won't be, or could be or couldn't be. Nobody seems to care about the qualifications of whoever is bloviating. The reaction seems to be "SOMEONE ELSE SAID THE WORLD IS COMING TO AN END...SO IT MUST BE TRUE!" The happiest day of my investing and information life was when I stopped watching TV news, broke my habit of reading beyond the hysterical headlines on the internet, and just followed my own 63 year old head to...a shit pile of $$$$. in stocks.
7-02-2008 @ 7:40PM
Warren said...
After reading this article and the poll which was taken, I feel very reassured that my buying these beaten up stocks today and this week, is the right thing to do ! Whenever "Everyone" thinks the market will tank, we are usually very near a bottom. There are now many Trillions of dollars sitting on the sideline earning negative returns in money market accounts. Someday, it will occur to some people that earning these quarterly dividend payments while we wait for the next bull, is not such a bad idea. By the time "Everyone" thinks we are going to 20,000 on the DOW, then I will of course sell them some of my shares, so they can also enjoy the last leg of the bull.
7-02-2008 @ 8:05PM
Financial Cents said...
There is no doubt in my mind that the Dow will hit 10,000 and S&P 500 will go to 1000 at the minimum. With banks failing, the housing bust, decreased consumer spending, and massive job layoffs, there's no way that this economy can recover for another 2-3 years! And the kicker is, there is nothing we can do about it. Unfortunately, this is reality.
http://financial-cents.blogspot.com/
7-03-2008 @ 7:09PM
Chris said...
I certainly hope so. Everything is priced too high right now. Let the markets reset, so I can buy back in at a very low level, like 7000.
7-03-2008 @ 7:09PM
Chris said...
Warren, judging from your comments you must be a broker. I sold most of my stocks last fall just before the crash. I've been earning +5% ever since. When this thing bottoms next year and starts back up, I'll buy back in big!! Good luck.