My god,look at the Dow Jones!

[Swede]

Stay for the long haul,you'll make money.

[Bluebear]

1. Yay! I will be rich when I turn 170!

[Swede]

4. Notice how it hasn't stayed down?

Start a PAC now and you'll by fine.

[MannyGoldstein]

16. After the peak in 1929, how long did it take to get back to the same level?

How about after adjusting for inflation?

[SoCalDem]

24. It did not even hit ONE THOUSAND until Nov 1972

http://www.nytimes.com/learning/general/onthisday/big/1114.html#article


and
http://articles.sfgate.com/1999-03-30/business/17682703_1_newton-zinder-dow-jones-today-s-dow

Way the World Was When Dow Broke 1,000
March 30, 1999|By SAM ZUCKERMAN

When the Dow Jones industrial average first closed above 1,000, President Richard Nixon had just been re-elected by a landslide. U.S. and North Vietnamese negotiators had agreed to a new round of peace talks to end the Vietnam War. U.S. astronauts were getting ready to walk on the moon for the last time. Bill Gates was a nerdy high school senior in Seattle. A three- bedroom house in San Francisco cost $35,000.


Nov. 14, 1972, was not so long ago chronologically, but was light years back in the way the stock market worked and the role it played in American life. "It was an entirely different world then," said Newton Zinder, who was the chief market analyst of the now- defunct brokerage E.F. Hutton when the Dow broke 1,000. "There was much less public awareness and focus on the market. There was no CNBC, no day traders, no online investing." In the years since Dow 1,000, stock ownership has become one of the great badges of middle-class status in America, like owning an automatic dishwasher in 1972.

snip

Some 52 percent of those polled in a survey for NBC News/Wall Street Journal earlier this month said they owned more than $5,000 in stocks or stock mutual funds. U.S. households now hold more than $10 trillion in stocks, according to the Federal Reserve.

snip

It wasn't so in 1972. The stock portfolios of American households totaled just $813 billion then. "Participation in the stock market was pretty limited. It was the province of the very rich, the top 10 percent of families," said Edward Wolff, a New York University economist. It only took a few tries for the Dow to crash through 10,000, but the 1,000 mark was a tougher barrier.

snip

In 1972, the Dow registered gains a few points at a time. The biggest one-day rise ever, 32.93 points, had taken place the year before.On the day the Dow first finished above 1,000, 20.2 million shares changed hands on the New York Stock Exchange. Today, that's a few minutes worth of trading. Yesterday, NYSE volume was about 750 million shares.


snip

[izzybeans]

33. Roughly 30 years.

[Statistical]

34. 16 years if you count the value of dividends reinvested.

[David Zephyr]

12. That's a great line.

May I use it?

[Bluebear]

17. Of course :)

[DJ13]

2. I would sell now and buy back in once the dust settles

Book the profits (if there are any) and you can increase your share count by rolling those profits in and buying later.

[marybourg]

6. Good idea! Sell low; buy high. nt.

[jillan]

14. Rofl - literally!

[pitohui]

3. just how long do you expect to live?

most of the increase in the dow came in 90 days during the 90s, you missed it, friend

from here on out, it's just a random unpredictable walk around, no different from investing in the dice table except on the dice table you get "comps" and in the market you can get tax/retirement bennies so which you choose to play depends primarily on your life expectancy

an 80 yr old would be silly to play stocks since there's no "long term" expectation, he might as well play craps and get the free lobster/show/hotel room tonight...

it has been known for decades by mathematicians that the dow is a "random walk" but the human brain refuses to accept that random means random

thus silly theories like "buy and hold," "invest for the long term," and so on...there is no mathematics behind that kind of bullshit

where they say "past performance not predictive of future results?" THEY MEAN THAT, no one believes it because the human mind can't accept randomness, BUT THEY MEAN THAT IT'S MATHEMATICALLY PROVEN

[Swede]

8. Hence the buy and hold.

Move to more conservative investments in the later years.

[pitohui]

10. yes a silly theory that once again proves the human mind can't accept randomness

"buy and hold" SOUNDS so logical, doesn't it

[Swede]

15. And it works.

Yet folks just can't see it.

[Statistical]

18. Not true there is no 20 year period where the DOW wasn't profitable.

What is not seen from the chart is the contributions of dividends. The power of compounded returns.



Not that I am saying invest in the DOW and wait 20 years but it shows that the market is a positive sum game.

[PufPuf23]

20. Random walk is a popular assumption but

market movements are fractal -- normal distributions with long chaotic tails -- hence Black Swan events.

A Random Walk Down Wall Street was a popular book 25 years ago.

There was a very sad video posted here once at DU with Taleb (hedge fund and author) and Mandelbrot (mathematician) regarding the market meltdown and how many financial engineers do not understand their models. Mandelbrot first wrote a paper in the 1950s showing markets were fractal not random. Black-Scholes is a fractal equation.

[phasma ex machina]

25. deleted

[AllentownJake]

5. Adjust for inflation please nt.

[yodermon]

21. on short notice: CPI-adjusted DOW chart

[AllentownJake]

23. Thank you nt

[Statistical]

26. Thanks. However most people don't realize that roughly 1/3 of total return

from DOW comes from dividends. Something not reflected in the Index.

When you factor in dividends returns get even batter.

[AllentownJake]

29. Unless you are looking at the NASDAQ

Where dividends are less frequent because people bought into this idiotic idea it is better to want equity appreciation, or as I call it, the CEO takes the dividend and passes it around the E-suite.

[Speck Tater]

7. Instead of plotting the DOW in dollars, how about plotting it in ounces of gold?

How many ounces of gold did it take to buy one share of the DOW in 1900? How many ounces of gold does it take today?

Or how about loaves of bread? How many loaves of bread per share in 1900? How many loaves of bread per share today?

[Statistical]

32. Very interesting.

I will run some analysis this weekend if I can find historical gold data (monthly close prices) for last 100 years.

[lumberjack_jeff]

9. In the long run, we're all dead. nt

[HooptieWagon]

11. K&R n/t

[FSogol]

13. That's not the dow jones, that's the number of posts on DU.

[cliffordu]

19. We just yanked my wife's inheritance out of the market...

This oil thingy is going to completely fuck up the tourist economy in the gulf, and MAYBE up the east coast.... Fisheries gone.....

I am generally not a doom and gloomer :rofl: but I get the feeling folding money might be what we need pretty soon....

[Odin2005]

22. That chart is not adjusted for inflation.

[Chemical Bill]

27. Yeah but....

They cut unproductive stocks periodically, and substitute the highest performers. Does the average include the hit taken when you have to sell your losers?

Bill

[A HERETIC I AM]

28. Actually, yes, it does.

FWIW, they don't "cut unproductive stocks", as having an issue removed from the Dow 30 has nothing to do with it being unproductive. It has to do with market capitalization.

If you look at the weeks before and after the removal of GM and AIG for example, you won't see any dramatic shift up or down on the DJIA as a direct result of those replacements. The index is remarkably accurate for assessing what it is designed to assess, namely the overall value and health of the largest companies on the NYSE.

There would be very little point in the continued listing of the Victor Talking Machine Company (one of the original 30 Dow stocks) in this day and age.

http://allfinancialmatters.com/2007/07/27/the-original-dow-jones-industrial-average-thirty-components/

[Statistical]

31. That isn't how stock substitution in an index works.

For example when GM was removed from the DOW they didn't erase the 90% loss in GM value over the previous decade. It simply was no longer part of DOW thus future losses would not longer affect it.

If you bought every company when it was added to the DOW and sold every company when it was removed from the DOW you could replicate the value of DOW yourself.

Of course index funds do it far easier simply due to the sheet number of stocks required to replicate the DOW (30) or S&P500 (500).

[marmar]

30. But this is based on an unlimited growth, unlimited resources paradigm.....

That paradigm is dead.