Ignore the Hype: Dow Over 14,000 Isn't All That It Seems

Judging the major business media, the Dow breaching 14,000 was a HUGE event. I like to celebrate like everyone else but here are some reasons sober investors shouldn't pop the champagne yet.

I just read an interesting article on NPR in which NY Times columnist David Leonhardt discusses the implications of the Dow being above 14,000.  Here are some reasons he lays out for not getting too excited that the Dow is above its former record mark:

  • The price of nearly everything rises over time due to inflation so that stock market going up, in and of itself should be no big news.  It has to go up above and beyond inflation for people to really make money.
  • The Dow is not a broad indicator of the health of the market.  It is a narrow index that doesn't do a great job of tracking the overall health of the market.
  • The S&P is a much better indicator and in inflation adjusted terms it is still 17% below the peak it reached in 2000.  The Nasdaq, another broad indicator is still well below its peak in real terms.

You can read the article here.

Sol Nasisi
Sol Nasisi: Sol Nasisi is the co-founder and a past president of BestCashCow, an online resource for comprehensive bank rate information. In this capacity, he closely followed rate trends for all savings-related and loan products and the impact of rate fluctuations on the economy. He specifically focused on how rates impact consumers' ability to borrow and save. He also has authored a wee

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Comments

  • Anonymous

    July 23, 2007

    Good comments. I agree. Strip away the hype.

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