Fun With Numbers

In my first post I rattled off some numbers. I use the Dow as the basis for the numbers here. In truth, the S&P is the better basis to use, but the Dow is more widely used by the media.

Dow peak - October 2007 - 14,165
Dow low - October 2008 - 8,451
Total drop 40.34% from peak to trough
The "average" bear market is 30%

In just October the Dow is down roughly 20%. So, the bad news is that no matter how ugly your last quarterly 401k statement looked that ended on Sept 30, the numbers are even worse now.

If my estimate of Dow 7,000 does come, we're looking at roughly a 50% haircut.

Now, here's some sobering information. In Nov 1998 the Dow was at 9000. That's right, in 10 years the Dow has gone nowhere. Anything you had back then is worth the same today (actually worth less when you take into account inflation). And any new money you've been putting in over the past 10 years has been at higher levels, therefore all of that has actually lost money. I don't say this to sway anyone away from investing, but I say it to get you to think a little bit. The typical "buy and hold" does work over the long haul, but there's nothing wrong with being active with your investments. I'll explain further later... the markets just opened and I want to see how things look...

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I'm back. I'm at my home away from home away from home... the DFW airport. A little time to kill before boarding starts.

The markets headed down early and have bounced back nicely. At one point up about 250 points, now up 150. Which way will we swing this afternoon... round and round she goes, where she stops nobody knows.

As I mentioned I read as much as I can, get as much input as I can, listen to all the analysts, do my own thing and I mix it all together and come up with my own game plan. Maybe my original target of 8500 was the right one and I'm pushing it by saying we have more downward motion to go. If I'm right, great. If I'm wrong, I'll learn from it.

Alright, no rambling, the Dow is up 112 right now at 2:40pm eastern time. My plane takes off 10 minutes before the markets close so I'll miss the final few minutes. I can't wait to land to see what the closing bell says.

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And now I'm home.

The good news, the Dow was up 4% this week, the biggest weekly gain in 5 years.

The bad news, the Dow was "only" up 4% after a 20% straight drop in October.

I see this as weakness I'm afraid. After the huge rally on Monday of over 900 points, over half was given back by the end of the week in a very whipsaw fashion.

The next two weeks could be pivotal according to one chartists theory. If we survive without a crash we'll be safe for about 2 months I think. Then we worry all over again.

Please note, I'm not a total bear or pessimist, I'm simply being realistic about the current state of the economy and the market. I'll explain what I'm seeing and feeling.

I have made a lot of notes to myself about things to blog about which I'll start on over the weekend when I'm not eating sausages and elephant ears at the fair.

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Just came across this very good article.

http://biz.yahoo.com/etfguide/081017/65_id.html?.v=1