Thursday, November 20, 2008
Almost six weeks ago, we asked readers to forecast the bottom for the Dow Jones Industrial Average and the month in which that bottom would occur. My prediction was 6800 in March, 2009, and your answers are in the comments here.
Well, yesterday the Dow had its lowest close since 2003, below 8000, and, in what might be a bullish sign, the New York Times has given over front page real estate to stock market hanky-twisting.
But how much more to go? Dow 7,000? Dow 6,000? Many analysts are reluctant to say, having been proved wrong so many times before. The Dow has lost nearly 40 percent this year, and many of its blue chips, from Alcoa to General Electric, are down even more than that.
Well, 6800 is still 14% or so below today's level, and more than 50% below the high in October 2007, so I think it is as good a guess as any. Why March? Because the stock market discounts economic recoveries around two quarters ahead of their reality, and I think that next year's third quarter is the first that is likely to see positive economic growth.
What say you? Put the low on the Dow and the month we will reach it in the comments.
MORE: Andy Kessler (CWCID: Glenn) gives many cogent reasons why the stock market will suck until February, to which I would add that investors will want to get through Q4 "earnings season" to see how hideous things are in the "real" economy. There will be firms whose numbers deteriorate to the point that their bank covenants begin to bite, which would also be bad news for the equity.
I'll stick with my original number of 6,969. As I post this, we're at 7,932, so that's only another 963 points, or 12% down. I think we might hit it in December 2008 instead of January 2009. The real problem might be that we won't see Dow 10,000 for many years. Can we be content with 8-9% annual returns including dividends for four or five straight years? I'd be happy with that, though I don't believe professional money managers would be doing handsprings.
Whatever the real figure, it's going to be at least 6900 points higher than Congress' approval rating by this time next year.
Hell, this next Congress will likely be the first in history to have approval number in negative digits. Henry "I Kinda Look Like Heinrich Himmler" Waxman had better enjoy the sugar high from his little coup over John Dingell because he's going to wading through some deep s*** very soon.
After today's 450 point drop it looks like we could have Dow 6900 by next week.
Looks like the announcement of the auto company loan had a lot of traction. I'm beginning to think it is better if the Fed's don't announce any new programs.
I see no reason to change my prediction of Dow @ 2600, S&P 500 @ 275, in November 2011. There are still a lot of shoes to drop, and the new administration still has a great many policy errors to commit.
I'm starting to think our bigger risk isn't the low point of this particular bear run, but instead repetitive bear markets for the next ten years or so, making lower tops each time and provoking ever higher unemployment. That's what really scares me.