In the hall of the Metro Denver Chamber of Commerce today, someone called out “the recession’s over, did you hear? The Dow was over 10,000 today!”
Is it? Is this economic bad dream finally over?
If you’re like most people, and like me, the past couple of years have not been a time to hunt for the next hot stock, or put more money in growth-oriented mutual funds. It’s just too stressful, too many factors to consider. Fewer of us have money left to risk, and both long shots and safe bets seem to be doing crazy things.
Today we hit five digits on the Dow, back into 10,000 territory. What that means is that the prices of a collection of stocks selected to reflect the market as a whole, passed a milestone on the way to values which we have seen before, but not in several years. Analysts will debate whether a full recovery is back to the top, or to a more ‘reasonable’ number for now, maybe even around 10,000.
Like many investors, I saw the number just as a reminder to check my investment philosophy. Is the market more stable? Enough to make more solid investments? There is almost always a decent investment opportunity, but when so many are rocking the boat I don’t think the market has a chance of coming through.
Some people will tell you that good stock market results validate government policies. They are investing in politics, not stocks. The billions government put into the market restored an erosion with many origins, not the least apparently forced bad lending practices for political reasons. I believe in the market’s wisdom. Government’s, not so much.
An article today at Bloomberg.com basically affirmed my view – bonds for now, but things are looking a lot better. Those they interviewed were saying that 10,000 is just a number, but it’s a number that catches people’s attention.
I’m looking longer term as I get older. I’ve been a sailor and an airplane pilot as well as an investor, and I learned one basic principle in all three: keep an eye on a point on the horizon.
I hate to think that I’m old (or conservative) enough to be thinking ‘blue chip’ so much. I was excited to hear that companies like IBM, HP, and Intel are playing a big role in pushing up the Dow, though. My day job is in the computer industry, and computers and networks are the same thing as bricks and plumbing these days. If companies aren’t keeping them up, it’s bad news.
My strategy seems to go better investing in less glamorous companies. I’ve spent time invested in retail in the past, in foods and even some solid multinationals. I’ve been investing since the early 80’s, and it’s paid off to not get tempted into the next big thing so much.My feeling is that bad strategies and over extension by companies in the current market have largely been punished already, and I’m looking around to see who’s left.
Based on my knowledge in the computer industry I see computer server systems and the chips that go in them as good bets (IBM, HP, Intel) and that’s already showing as true. I am looking for companies that have been responding positively to the changes in the economy, with new strategies and reinvention and pretty harsh pruning of their organizations when necessary.
I’m not back into the market in any serious way yet, but the Dow passing 10,000, as well as the strong stocks behind the steep climb back to this point have me sitting up and paying attention. If the government signals its trust in the market and shows it has learned its lesson as well, I look forward to investing more aggressively soon, and still sleeping soundly at night.
“Investors Favored Bond Funds as Dow Average Rallied Past 10,000”, Jeff Kearns, Mary Childs, http://www.bloomberg.com/apps/news?pid=20601103&sid=aBOZh3DdrK3w