Roundtable: Dow 10,000. What Now?

So the Dow hit 10,000 again yesterday. It’s just a number, so we won’t dwell on it.

What we will talk about is whether we’re better off now than the last time we were at 10,000 (last year). We’ll also Foolishly hypothesize about which companies will prosper if we hit 15,000. And which will prosper if we drop to 5,000.

Without further ado, let’s see what three of our analysts had to say.

The Dow was around 10,000 a year ago, went down below 7,000, and just recovered to around 10,000. After bailouts and stimulus efforts, how much better off (if at all) are we today than last year?

Rick Munarriz: We're a lot better in nearly every sense. Consumers see the light at the end of the tunnel. Analyst estimates are inching higher again. Companies have also taken dramatic steps to improve their bottom lines over the past year. 2009 will be remembered as the year in which even Microsoft (Nasdaq: MSFT  ) announced layoffs. Meanwhile, Dell is committed to obliterating $4 billion in annual costs by the end of next year. We can curse these companies for packing that kind of fat a year ago, but the important thing is that so much more of every dollar generated in revenue will trickle its way down to the bottom line.

Matt Koppenheffer: How much better off are we? Well that's a loaded question if ever I've heard one. On the one hand, consumers have backed off the ledge that they were on this time last year -- which means they just may buy that flat-screen TV they've been eyeing at Best Buy. Businesses have also become a little less jittery, giving hope to everyone from transportation companies like CSX to technology providers like Oracle.

But on the other hand, if JPMorgan Chase's earnings were any sign, there's still little that's really changed in banking -- a major contributor to getting us into such a massive mess. And don't even get me started on what happens if the government pulls out the cash IV that it's been providing.

Morgan Housel: There are two ways to answer that question. First, it's indisputable that credit markets are more stable now than last October. Things like LIBOR and the TED spread were just off the charts last year, and today are back down to levels that would be considered normal in any healthy year.

But a lot of those improvements are thanks to policies that are both temporary and experimental, so no one really knows what the final outcome will be. Will excess bank reserves turn into excessive, speculative lending? Could happen. Will temper tantrums return when the Federal Reserve's emergency programs like TALF, or the purchasing of mortgage-backed securities, end? They certainly could.

So while we are better off than we were this time last year, I'd say it's premature to write the financial crisis' obituary just yet. It's easy to look healed when you cover up your wounds.

Give me one stock that would survive if we hit Dow 5,000 and one that would thrive if we hit Dow 15,000.

Rick Munarriz: I am going to get laughed out of this roundtable, but I think Sirius XM Radio (Nasdaq: SIRI  ) will be a big winner if the Dow quickly barrels toward 15,000. It's a high beta stock. It has appreciated several times over during this year's rally. If the Dow is at 15,000, it means that consumers are feeling pretty good, and satellite radio subscriptions will be a popular leisurely indulgence.

If the Dow hits 5,000, I'll go with Netflix (Nasdaq: NFLX  ) . This was one of the few leisure stocks to appreciate in 2008, because recessions are made for couch potatoes with unlimited DVD rentals. The stock hasn't been a leader in this market rally, but its all-weather fundamentals will serve it well if the next step is down. 

Matt Koppenheffer: Health-care reform be damned. Johnson & Johnson (NYSE: JNJ  ) strikes me as a company that will fare well even if the market gives up the ghost. And if the market keeps up its charge? Keep your eye on exciting, high-growth stocks like Intuitive Surgical (Nasdaq: ISRG  ) .

Morgan Housel: When the world was coming to an end earlier this year, I looked at my Philip Morris International (NYSE: PM  ) stock with great glee. There are few companies in this world whose products are as sought-after and recession-proof, and even fewer that are loathed so much that shares consistently stay compressed, and hence dividend yields high. It's a wonderful combination.

As for Dow 15,000, getting there within the next few years could probably only be done through rampant inflation or a dramatic revival of consumer spending. Both I'd say are improbable, but if consumer spending really springs back, niche consumer discretionary companies that are extremely well run, like Coach (NYSE: COH  ) , I'm sure would do well. 

We’ve given you our opinions. Let the discussion begin in the comments section below!

This roundtable article was compiled by Anand Chokkavelu, who owns shares of Intuitive Surgical, Philip Morris International, Sirius XM, and Microsoft. Intuitive Surgical is a Motley Fool Rule Breakers selection. Best Buy, Coach, and Netflix are Motley Fool Stock Advisor picks. Best Buy, Dell, and Microsoft are Motley Fool Inside Value selections. Johnson & Johnson is a Motley Fool Income Investor recommendation. Philip Morris International is a Motley Fool Global Gains pick. The Fool owns shares of Best Buy and Oracle.The Motley Fool has a disclosure policy.


Read/Post Comments (25) | Recommend This Article (12)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 15, 2009, at 12:37 PM, RAF22 wrote:

    Re: Rick's comment regarding upside potential for Sirius XM SIRI - There is a very significant article about new developments for Sirius XM on Satwaves.com this morning: "Audiovox Bullish on Sirius XM Radio". This article is must reading for all involved with SIRI as it provides comments from the leading hardware supplier to Sirius XM with regard to production/delivery/demand for the new SkyDock and other Sirius XM products, and the ramping up of marketing plans and arrangements with Apple that are very significant. These comments from senior executives of Audiovox provide insight from those on the front lines of production - an early look at developments that should significantly benefit Sirius XM going forward.

  • Report this Comment On October 15, 2009, at 2:00 PM, SIRIDoom wrote:

    Satwaves and Seeking Alpha are pro-SIRI propaganda sites. Seeking Alpha Censores negative news and opinions... AVOID DO NOT READ SEEKINNG ALPHA PROPIGANDA...

  • Report this Comment On October 15, 2009, at 2:00 PM, southernbeachguy wrote:

    Good for you Rick, it is finally nice that someone in the Media has recognized the Potential of Sirus. Considering they are THE dominant Radio Network in North America, they can only GO UP. If someone tries Sirus, they will never change.....they have something for everyone (Oldies, Talk, Hip Hop, Jazz, Christian, Comedy, Sports). It provides me hours of listening Enjoyment every day.

  • Report this Comment On October 15, 2009, at 2:13 PM, dedmunds wrote:

    Must read Satwaves.com upside potential for SIRI. Great view how Audiovox sees the excellant potential for SIRI and there company!! Another great site is Seeking Alpha for information on SIRI. SIRI is on a roll and WILL GO UP FROM HERE!!!! BUY BUY BUY!!!

  • Report this Comment On October 15, 2009, at 2:33 PM, RAF22 wrote:

    SIRIDoom - Seeking Alpha only censors blatantly false and misleading information - similar to your yesterday comments of $11 billion in long term debt at Sirius XM when the actual figure is $3.029 billion as of 9/30/09. Seeking Alpha properly censors abusive and repetitive comments - so you have properly run into this type of censorship on their site.

    Motley Fool would be wise to do the same, as their credibility is also at stake when false and misleading information is allowed to be posted on this site.

  • Report this Comment On October 15, 2009, at 2:42 PM, karaokejb wrote:

    You should have also mentioned that doughnuts are a indulgence and Krispy Kreme will be a Sugar coated success!! But, then again subscriptions to investor companies that did not pick winners during the downturn are also an indulgence. But I digress.....

  • Report this Comment On October 15, 2009, at 2:44 PM, dedmunds wrote:

    RAF22 your so right, I have been reading Seeking Alpha for a long time and don't believe they censor negative comments. They are a proffesional site that follows the upside potental that SIRI has. Only negative comments about Seeking Alpha that I have seen comes from that SIRI basher SIRIDoom!!!

  • Report this Comment On October 15, 2009, at 3:30 PM, traderbach wrote:

    I can only say that personally Seeking Alpha has been very helpful to me. If they're filtering their information it seems to me that the good stuff is what is published. I've made money by reading their reviews. Just the simple truth of my experience over a long period, no conjecture. RAF22 & dedmunds seem to be just telling it how they see it & I agree.

  • Report this Comment On October 15, 2009, at 3:35 PM, traderbach wrote:

    Would also like to say that I personally am very interested, & I think it would be in the interests of the community as a whole, to stay on track w/ comments on the core subject of the article which is "Where is the market going?". Major correction looming, sideways waddle, or major zooming? A consensus of opinion on that from some of our wise & accurate members would be great for us all. Should we get into cash temporarily or ride the market thru? If any have the time I would be very grateful to read any comments they could post here.

  • Report this Comment On October 15, 2009, at 4:14 PM, SIRIDoom wrote:

    Everyone should complain to MF about the spam advertising Seeking Alpha and Statwaves. These people are pro SIRI propiganda spreading and censoring Communist.

    Are we reading here for stock information or propiganda and spam?

  • Report this Comment On October 15, 2009, at 4:42 PM, SIRIDoom wrote:

    SIRI 11 Billion in debt is a total that RAF can not understand. He and the people at Statwaves think borrowing money is free. Estimate refinancing that will be needed and service fee's you get more than 11 billion in the next 4 years..

    “so let's see, $500mil in interest each year (and going higher with

    each re-fi)... plus the $260mil in convertibles that comes due in Dec...

    2010: ~$500mil in interest plus $350 in loans coming due (UPDATE THIS ONE - SOME PAID THIS YEAR ON THE BACKS OF INVESTORS WITH STOCK ISSUE AND BONDS)

    2011: ~$500mill in interest plus $650 in bonds and loans due

    2012: ~$500mil in interest plus $500mil in bonds and loans due

    2013: ~$500mil in interest plus $1.8bil in bonds and loans due

    2014: ~$500mil in interest plus $555mil in bonds and loans due”

    Now look at the revolving credit line.

    SIRI uses the revolving credit line and charges it off on investors. They keep it funded by 1. Share issue 2. Malone deal 3. Bond issue. They actually turn the credit line into an asset by putting it on share holders. Is that how you want to see a company get income?

    11 billion is an under estimate. So, who is lying? Shore I do bash SIRI. I bash any stock that is in this bad a condition and managed this badly.

  • Report this Comment On October 15, 2009, at 5:12 PM, dedmunds wrote:

    SIRIDoom you must have a real problem? Is it that you see some great comments here? I think you are seeing that SIRI is becoming a great company that has turned around well in this ression and are freking out knowing that shortly SIRI will be very profitable for all involved. At that point you will have to find another stock to pick to death on your time, good luck in your future your going to need it!!!!

  • Report this Comment On October 15, 2009, at 5:26 PM, SIRIDoom wrote:

    LOL heheheh, Just the facts. Debt, the true fact that get censored from Seeking Alpha. The real facts that get ignored and twisted at statwaves. The SIRI paid advertisers continue...

  • Report this Comment On October 15, 2009, at 5:42 PM, RAF22 wrote:

    SIRIDoom - Your cockeyed hypotheses are contrary to accepted accounting procedure and I would suggest you contact the auditors who prepared the annual and quarterly statements that I quoted (see Zacks Investment Research) and let them know they are off the mark by a factor of 400%. I am sure they will enjoy speaking with you.

  • Report this Comment On October 15, 2009, at 5:50 PM, bernbern0 wrote:

    This is a reply to traderbach about "Where the market is going?" Obviously, no one really knows. Hopefully, there are positive signs that it will be headed higher. But whether the market goes higher or lower, I think the best advice from The Motley Fool and Seeking Alpha (in my opinion) is to choose solid dividend paying stocks with a long history of both paying dividends as well as inceasing dividends. (After doing your proper homework) Then, who cares whether they go up or down because you get your steady dividends either in cash, or better yet, continue to re-invest your dividends.

    I bought several dividend paying stocks a little at a time right after the March bottom and continuing thereafter. Needless to say they're all higher than what I bought them for. If they go down, I will buy some more. (and will actually be buying more with my re-invested dividends) If they go much higher, I will resist selling to make quick profits unless warning signs start to appear for individual companies. Good luck, and let's hope for less turbulence!

  • Report this Comment On October 15, 2009, at 6:25 PM, jesse2159 wrote:

    Someone actually thinks SIRIUS will someday actually make money? If you do make money on this stock I'll eat all the crow you can dish out. But wouldn't it be faster and easier to lose your investment at a race track or casino. At least you get free drinks in a casino.

    As for any cigarette company. I don't need blood money. Too many people die from their product to allow my conscience to buy this stock. I'd feel like a street corner drug dealer.

  • Report this Comment On October 15, 2009, at 8:54 PM, Pantaloon007 wrote:

    Don't knock drug dealers- the markup is ridiculous and customers stay for life. Of course I'm kidding, but in the interest of making money, SIRI is as speculative as buying and selling crack. As long as people think sat radio will one day be a viable business (I happen to think it will be), then there will be people to buy into Karmazin's idea. Whether or not Sirius is the company that will make that happen is a whole other story. A great many of the original cable TV companies that started out in the late 70's are not in business today...

  • Report this Comment On October 16, 2009, at 1:33 AM, canadacomments wrote:

    How did these sirius guys hijack this discussion?? I was hoping for some really thoughtful, serious comments on what way the market is headed and why. This stuff belongs on the Sirius forum.

    The Dow at 15000 won't happen quickly unless we have serious inflation. I don't see that happening with unemployment growing and the housing crisis continuing. I'll stick with commodities for now thanks.

  • Report this Comment On October 16, 2009, at 2:25 AM, ozzfan1317 wrote:

    I lost a chunk of money on sirius but that was partly because I saw the bankruptcy news and wanted to cut my losses. Great product but I dont see the company ever doing anything to reward shareholders. Maybe i'l be proved wrong one day who knows?

  • Report this Comment On October 16, 2009, at 10:26 AM, dedmunds wrote:

    Breaking news SIRI "CEO NO REVERSE SPLIT" !!!!!!

  • Report this Comment On October 16, 2009, at 10:26 AM, BigVincent wrote:

    Doesn't matter what direction the dow is going in. Inflation is a key factor. The fed continues to print money which makes the value of the the dollar less.

    When the economy pulls out of the recession completely interest rates will go higher, and lending will still be harder.

    Net incomes for loaned money will have to be higher even for high interest loans. I honestly don't see any good news.

    Sirius/xm is undervalued by about .50 it would be worth more but people are just undecided until the confrence call comes out with the promises Mel has left on EBITDA.

    PM will always make money on cancer sticks. It doesn't matter. Even when demand is low production can be slashed and the company can yield net gains.

    JNJ has to many product lines to have the share price go south, it's almost recession proof.

  • Report this Comment On October 16, 2009, at 10:34 AM, RAF22 wrote:

    SIRI continues to display technical strength this morning, gaining in the face of declines in the DJIA and other indices. Expect favorable news over the next few days - focusing on the formal launch of the Skydock. For related news on this - see Satwaves.com - with two most recent articles:

    "Live Content Comes to Apple iPhone & iPod Touch"

    "Audiovox Bullish on Sirius XM Radio"

  • Report this Comment On October 16, 2009, at 1:16 PM, SIRIDoom wrote:

    Everyone should complain to MF about the spam advertising Seeking Alpha and Statwaves.

  • Report this Comment On October 16, 2009, at 2:34 PM, RAF22 wrote:

    SIRIDoom - Anyone who has been reviewing Seeking Alpha and Satwaves has had correct - and early - recommendations about the improving outlook for Sirius XM over the last few weeks. This could only have been to their advantage. If they have been following all of your negative advice over the last few weeks they would have missed one of the great opportunities in the market, or - even worse - shorted into a strengthening framework for SIRI, to their presently increasing loss.

  • Report this Comment On November 05, 2009, at 3:20 PM, traderbach wrote:

    bernbern0

    Only just saw your comment. Better late than never so I'd like to say thanks for taking the time. The dividend stocks does seem a good way to go!

    Thanks.

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