The Daily Walk of Shame: Dow 10,000

This new Motley Fool series examines things that just aren't right in the world of finance and investing. Here's what's got us riled today. If something's bugging you, too -- and we suspect it is -- go ahead and unload in the comments section below.

Today's subject: On Oct. 14th, the Dow Jones Industrial Average breached the 10,000 mark for the first time since the fall of 2008. Like a group of mountaineers exiting the death zone above Mt. Everest Base Camp 4, the investing community roared in delight and threw their ice picks in the air with rejoice. On the heels of strong earnings from Intel (Nasdaq: INTC  ) and JPMorgan Chase (NYSE: JPM  ) , the Dow 30 surged ahead and closed the day at 10,015.86. Sighs of relief could be heard across the financial landscape. Celebration erupted on the floor of the New York Stock Exchange, traders called other traders; investors bartered with one another for the next stock tip. And I'll admit it: I got a few butterflies in my stomach as well. I thought to myself, could this really be the turning point we've been looking for?

Why you should be indignant: On the day of the great summit, CNBC ran headlines that screamed "Dow Hits 10,000! What Will Stocks Do For An Encore?" Another banner read, "Dow 10,000: More Than Meets The Eye?"

First, I'll admit that the Dow breaking 10,000 does indeed break some sort of psychological barrier that selected investors may fall prey to. The market is in fact highly irrational, so for those analysts watching the trend lines, this may indicate that things are getting better.

I, however, was looking for different headlines the next day. Nothing truly specific -- any of the following topics would have been sufficient.

Although the Fed has said that the recession is "very likely over," it continues to oversee a various number of expensive and unparalleled economic rescue programs. If these initiatives aren't wound down sometime soon, we are going to have some serious inflation concerns.

Our national deficit has surged to an all time high of about $1.4 trillion -- as a portion of GDP, the deficit is about 10%. This is the highest it's been since World War II. As revenues from taxes decrease, and long-standing issues like health care and social security are tackled, it doesn't seem like this problem is likely to disappear anytime soon.

Setting a 26-year high, national unemployment rose to 9.8% in September. Labor market stress continued in all but seven states. Unemployment is expected to peak in February 2010 at a whopping 10.2%, but already states like California, Nevada, and Michigan are above 12%.

Foreclosures rose by 5% in the third quarter as nearly 938,000 properties were affected by the downturn. Banks repossessed 88,000 homes in September alone, up almost 16% from a month earlier.

Last, but of course not least, is the dormant yet inevitable prospect of a commercial real estate bust. According to Daniel Tishman, CEO of one of the oldest construction firms in the U.S., "trillions of dollars are involved in commercial loans. The rollover of those loans in the next 5-7 years is going to happen and the money just isn't there for financing." Although some REITs like Vornado Realty (NYSE: VNO  ) and Boston Properties (NYSE: BXP  ) have rebounded since March, banks remain "very exposed" according to Tishman.

Uh-oh.

Wrapped in the distress of that quick summary, the Dow hitting 10,000 doesn't seem too special anymore, does it?!

A day after the festivities subsided, I realized that this "landmark" was like Goldman Sachs (NYSE: GS  ) reporting a $3 billion profit for Q3 -- something to be ignored. Goldman has exceeded earnings in 13 of the last 14 quarters, and thus their "record" earnings, like the Dow 10,000, doesn't mean all that much to me. I hate to draw upon the overused cliche of Wall Street vs. Main Street, but in this case, it seems apropos. Do we think that thousands of unemployed people woke up last Wednesday and squealed in delight as Bloomberg reported the Dow's daily achievement? Does the movement of a few stocks help anyone whose house has been foreclosed upon, or anyone who just got laid off and has a family to take care of? Dubious.

Simply put, the overreaction to the 10,000 benchmark was silly, premature, and out of context.

What now? Well, I know it may seem like I am some raging pessimist who thinks we are heading for a national downward spiral. But I'm not -- I'm just amused and a bit upset at how we react to such arbitrary numbers. Was 10,000 any different than 9,867? When the Dow fell under 7,000 back in March, was 7,062 truly any different than 6,763? I don't think so.

As an investor, of course, I am happy that stocks are moving upward, but in no way will I accept 10,000 as some sort of economic indicator or sign of recovery. Am I the only one who thinks the media and the general public need to get a bit of perspective here and relax? Do Fools agree with me here or do I just sound like someone trying to rain on the parade?

Jordan DiPietro does not own shares of any companies mentioned. Intel is a Motley Fool Inside Value pick. The Fool has a disclosure policy.


Read/Post Comments (9) | 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 23, 2009, at 12:51 PM, FoolsSpecialK22 wrote:

    "Wrapped in the distress of that quick summary, the Dow hitting 10,000 doesn't seem too special anymore, does it?!"

    "Do Fools agree with me here or do I just sound like someone trying to rain on the parade?"

    You just sound like someone trying to rain on the parade.

  • Report this Comment On October 23, 2009, at 1:13 PM, sgrossbrown wrote:

    I agree with you. It's all about the core value (Einstein's razor, knowing the business you are buying into, ignoring Mr. Market). If the market goes up, those who are invested enjoy the ride; if it goes down, we who have spare cash (albeit are also invested) have a buying opportunity...

  • Report this Comment On October 23, 2009, at 3:23 PM, cjb44 wrote:

    Dow 14,000 is the only number I care about, until we get back to where the Dow was pre-Democrats controlling Congress. Until we get back to breaking new records every month 10,000 is just a nice round number. 11,000 will be nice as well...but let's get back to the old Bush high or 14,000 and change.

  • Report this Comment On October 23, 2009, at 3:32 PM, Orkester wrote:

    Depends on where you stand: daytrader, long-term investor or other..., how you buy and sell, your strategies or whether you're part of the industry (analyst, trader,etc) or just a regular hard-working investor.

    Personally, i don't celebrate 10,000 or even 7,000. Daily or even monthly fluctuations, over a long period of time, become irrelevant provided you did your homework prior to buying your stocks.

  • Report this Comment On October 23, 2009, at 3:44 PM, Jtweez19 wrote:

    Jordan,

    You are 100% correct on your views regarding the dow hitting 10,000 but you didn't hit on WHY investors reacted they way they did when this occured. Millions of americans are looking for any glimmer of hope pointing to economic recovery, they will take anything, the dow hitting 10,000 is something the media said people should react favorably to, so they did.

  • Report this Comment On October 23, 2009, at 4:03 PM, alexxlea wrote:

    That's why those with small accounts larger than 2000 just need to daytrade. The advantage of not being a mutual fund is you can just lever up 2-4x for the day, buy on a dip, place a trailing stop on the sucker if you're levered low or manually follow it on higher leverages, and turn a profit you can live off of every day. You can average an average person's wage every 2 days of trading (1 gain 1 loss day) if you're just an average human being following a set of rules. Also, playing the caps game the way I do would be completely impossible, thus my set of picks which I haven't changed. I don't really care about the general market direction for my trading, but the macroeconomic outlook is absolutely terrible and this article highlights a lot of the reasons why many of my friends and family can look forward to a very glum decade.

  • Report this Comment On October 23, 2009, at 4:35 PM, dannyboy633 wrote:

    We also need to remember that besides the rally since March 09 the dollar is in a free fall. And I see it going all the way down, so all the gains since then are offset by the devaluation of the dollar.

  • Report this Comment On October 23, 2009, at 4:50 PM, pfool18 wrote:

    Good reality check - no an important one for most of us.

    So what do we do with it - individually and collectively?

  • Report this Comment On November 05, 2009, at 11:08 AM, 2humble2fool wrote:

    Dow 10,000 is just media hype - which is exactly what this article is - nothing more, nothing less.

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