The media finally received the headline they begged for and the Dow Jones crossed above 10,000, which was as irrelevant as the color shirt you wore today. Dow Jones 10,000 is nothing more than a great opportunity to sell the entire market which is extremely overvalued. It was a nice run and October was filled with opportunities to get the bear back into your portfolio. As a matter of fact, the Bears woke up and now are ready to take control of this market again. A little too late, but better late than even later.
Dumb Money now licks their wounds as they complain about the lost decade, since the Dow Jones was at 10,000 in 1999. This is very typical of the Dumb Money camp as they ignore reality where they can. It has not been a lost decade for the Dumb Money camp, but they have successfully devalued their portfolios by at least 25%, and even worse they have lost ten years. Dow Jones 10,000 can be compared to Dow Jones 14,000 in 2007, after which the benchmark dropped over 50%. Two years later, same story. Next stop for the Dow Jones will be 5,000 before another failed relief rally will take the Dow Jones higher. Over the next decade the Dow Jones will drift lower towards the 3,000 mark, which will represent fair value for the index.
The same problems which shaved over 7,000 points from the Dow Jones in more than two years still exist today with two differences: they have increased in size and attracted a new wave of counter-productive over-regulation. The same holds true for any other benchmark index, the Dow was chosen since it made the headlines, but otherwise is a very lousy indicator for anything. The S&P 500 came very close to 1,100 (in futures markets) which would represent yet another great opportunity to walk with the strong bear from here on.
Dow Jones 10,000 and the Bears are back, not judged by today which saw a minor drop across the line but rather by the events which will unfold as soon as Monday and throughout the remainder of the year. Next year will make that statement even more obvious. The Dow Jones hit 10,000 and this is about as good as it will get. Sure, it may add a little which is nothing more than another great opportunity to reach out to the bears and smile. What has happened over the past 24 months, give or take a few, is an insight of how the next decade will perform. The markets have basically given it away, but 99.8% of all market participants (the Dumb Money population which ranges from mutual funds to retail investors) will not be positioned on the smart side of the equation.
Dow Jones 10,000 and the bears are back, in the same fashion the bears woke up when the Dow Jones hit 14,000 in 2007. On top of all the pieces which crushed the Dow Jones by over 50% there is an ignored global power-shift, a worthless U.S. Dollar and super-inflation in the economic pipeline as well as a decrease in appetite for U.S. Treasuries and a move away from the U.S. Dollar altogether on a global scale.
Could it get worse?
Yes we can...
Posted by Apollo on October 16th 2009.
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