Hi Maurice, concerning the score keeping, from yet another perspective of the same rotting mess ... it was kindly pointed out to me by a cyber pal that the following is so ...
"December 26, 2001 -- The Fed isn't the only outfit that manipulates. The guys who construct the stock averages do their own manipulation, which is one of the reasons why the BIG averages show a lot more oomph on the upside than do the portfolios of the average investor.
For instance, we know that from it's high, the very broad Wilshire 5000 is down 27%, which is probably better than the way the average stockholder's portfolio has fared. Of course, you can't really manipulate the Wilshire -- there are just too many stocks in a 5000 stock average.
But the Dow and the Nasdaq have the ability to kick out bum stocks and put in (hopefully) new winners. For instance, in its effort to show growth, Dow Jones put in a dividend-less stock for the first time in its history -- the name of the stock is Microsoft. Actually, from the 1982 bear market low, only 10 of the 30 Dow Industrials still grace that venerable average.
As far as the Nasdaq is concerned, there have been a lot of er "replacements." This month 13 Nasdaq 100 issues were booted out and 13 "better" issues will be put in. Of the 13 who have been booted, their average price had declined by an astounding 93%. So you can see that there is a concerted effort by the "average-makers" to keep their averages growing in the best tradition of "growth America."
There's been a lot of talk about Warren Buffett's prediction that over the next ten years we can expect average returns on stocks of about 7% a year -- and that include dividends. Of course the reason for Buffett's "conservative" estimate is that stocks have already priced in major growth over the period ahead. The only surprise the market would have to deal with is if that growth doesn't materialize. If growth doesn't arrive, as the great majority of analysts promise, then we'll have a resumption of the bear market. It's as simple as that.
And speaking of the 7% growth, well-known analyst Don Hays notes, "With deflation being a dominant force over the next few years, it will be extremely difficult for corporations to grow their pension assets faster than the 7% growth that Mr. Buffett expects. That will mean huge pension liabilities for those large corporations with large pension funds, and that liability will have to come out of current earnings. In my opinion, that is another big skeleton that is in the closet of the large-cap indices and large-cap stocks." (Don Hays can be reached on the Internet)."
from the Dow Theory Letter.
Chugs, Jay |
