May 7th, 2006

Dow 12000, Fantasy Portolios, Stock Picks

Remember how you felt on your 27th, 33rd or 42nd birthday; or what you did last Presidents’ Day, Memorial Day 3 years ago? You probably don’t and that’s how this week’s market felt.

The major stock market indexes are forging ahead into territory that hasn’t been seen in 5-6 years and, yet, there are no fireworks, now blaring headlines, no cover page stories. You would have expected that the day we’ve been awaiting since the air started to be let out of the tech bubble at the beginning of this century would have been much heralded but it hasn’t. Some pictures are worth a thousand words, especially when they’re offered free (except for those who ckick on one of those ads) in a blog:

The Dow Jones 30 is within 1.45%, or 172 points, away from breaking the all-time high. One good day’s move could make that happen.

The S&P 500 is a bit further away from new high territory perhaps because it fell a further than the DJ-30 did (the DJ-30 fell 36% peak to trough while the SP-500 fell 49%):

Meanwhile, the NASDAQ Composite, heavily weighted to tech stocks and consequently the index that fell the most (78% from peak on 10/10/2000 to trough 10/8,2002), is the laggard in the recovery having recovered on 30% of the total peak to trough decline):

So I thought I’d do a search on “Dow Jones 12000” and came up with some interesting articles:

  • One other very important factor that almost everyone will miss if the Dow gets to the 12,000-12,500 ranges is that the dollar has lost over 30% of its value;
    the Dow will have to close 30% higher than its all time high of 11720 to usher
    in a true new bull market. This means the Dow would need to close past 15236. Over the past two years we have exposed this illusory bull via several articles
    in which we priced the Dow in stronger currencies such as the Aussie dollar,
    South African Rand, New Zealand dollar etc; priced in stronger currencies the
    Dow always looked rather weak and feeble. However one can still make a lot of
    money playing such markets if one invests in the right March 15, 2005

  • …. on May 6, 2006 it will have been seven years since the Dow first passed the 11,000 mark. So what’s the logical question on everyone’s mind – How soon until we see the Dow Jones Industrial Average at 12,000?…..We simply turned to the experts for their opinions. If you think the Dow is going to hit 12,000 in 2006, you’re in the minority. The analysts actually predict very little movement in the Dow for 2006. According to the experts, the Dow is going to hit 12,490 by year end in 2007. Exactly when in 2007, we’re not sure but a reasonable guess is June 2007. And we think our method is as reasonable, and accurate, as any other we’ve seen published. Now here comes the waiting game to see if that prediction comes true. –

  • … four reasons I expected the Dow Jones Industrial Average (DJIA) to not only exceed its prior record of 11722 set in January 2000, but also to reach and exceed the 12000 level.…we are now half way there …1) In my mind, a Fed move to the sidelines is a positive development for the stock market. This Fed move away from the business section front page is not far away. 2) …stronger upside moves by various stock markets around the world suggested stronger relative performance by the U.S. market in 2006. 3) media stories of inadequate savings will presumably drive millions of Boomers to finally get more aggressive about building adequate savings for retirement. More moves by Corporate America to replace “defined benefit” retirement plans with “defined contribution” programs should also motivate more Boomers to save more aggressively. 4) Distressed sales will rise in number in coming months. Over time, I expect this powerful shift of investor dollars to move toward the stock market, pushing stock prices higher. Jeff Thredgold, Economic Futurist

A couple of weeks ago, I wrote about beginning to become more bearish about the market (Bottom of the List: Big Stock Declines) yet, since then, the market has continued its move up. As a firm believer in the power of momentum investing, I continue to ride the wave but do so with ever more caution. Gnawing at me is the counter-argument of a the “secular bear market” thesis and the other economic, political and international forces that give us angst.

CNBC Fantasy Portfolio Leaders

According to CNBC, as of last Friday there were around 148,000 participants in the Challenge. And since the Challenge began, 259 unique participants have made it to the top-50 leader board. While the leader has chnaged frequently (Eric Lambi, the first leader, now ranks 21), there appears to be fewer new names being added to the list. Here is the list for the past several days (each day’s leader is highlighted in blue):

5/2/06 5/3/06 5/4/06 5/5/06
Average 1,792,543 1,811,945 1,873,433 1,892,790
Max 2,171,756 2,151,196 2,123,739 2,134,844
Min 1,695,452 1,696,285 1,773,147 1,799,012
btumhhay 1,923,763 1,925,763 2,082,664 2,134,844
Tlicious 2,155,916 2,151,196 2,102,826 2,129,842
ramanathan 1,828,431 1,815,010 2,095,201 2,091,618
thomasko 1,968,432 1,976,571 2,007,102 2,085,904
JCMCC1689 1,795,554 2,074,738 2,085,215
Squawk-Hawk 1,813,522 2,070,454
dwn4lovin 2,171,756 2,117,976 2,123,739 2,069,508
richyoung 1,784,973 2,037,888
amehrotra 1,839,035 1,993,115
Etorralba 1,749,019 1,739,010 1,900,383 1,947,449
dowmaster 1,857,306 1,827,734 1,885,281 1,939,722
im2a1c0 1,818,430 1,744,038 1,911,554 1,931,285
libing8c 1,804,148 1,813,857 1,813,857 1,930,831
timtrish 1,772,636 1,696,889 1,924,685 1,926,685

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