MrB, the URL in my previous post takes you to the DJIA site only. To
see a chart for any 10 year period click on 'Dow data'. The URL dis-
played in the browser's location window does not change as you move about on the site. Here's a little story from that site:
The DJIA's Past Isn't Prologue
In the spring of 1951, when his best student was graduating from Columbia
Business School, Prof. Benjamin Graham, often called the father of value
investing, had some advice.
The Dow Jones Industrial Average had traded below 200 at some time
during every full year since its inception in 1896, Prof. Graham noted. Because
the average, then at about 250, had yet to trade below 200 in 1951, perhaps
the student would be better off postponing his investment career, waiting until
the average made its usual sojourn below 200.
This advice-singularly bad in retrospect-violated Prof. Graham's own tenet
against trying to forecast markets. No matter. The student, Warren E. Buffett,
who had gotten the only A plus that Prof. Graham had ever awarded, didn't
listen to him. Lucky thing, because the industrial average didn't go back to 200
that year or, indeed, in any year since.
Today, Mr. Buffett is a billionaire and is considered by some people to be the
best investor in history . "I had about 10 thousand bucks" when Prof. Graham
gave his advice, Mr. Buffett recalled. "If I'd taken [the] advice, I'd probably still
have about 10 thousand bucks."
In retrospect, it is obvious that teacher and pupil were separated by a
generational divide. For investors who were nearly wiped out in the 1930s, the
Great Crash was formative. Whenever the industrial average got "too" high or
the mood on Wall Street too happy, old-timers expected another crash.
Prof. Graham's mistake has been faithfully repeated by investors of each
succeeding era. His real error was to ascribe some meaning to an absolute
number on the industrial average. In the abstract, neither DJIA 250 nor DJIA
5000 is "high" or "low." It all depends on the earnings and prospects of the
underlying stocks in the index. To assume that the index will return to a
previous level is like calling a pitch a strike with one's eyes closed, merely
because the previous pitch was over the plate.
-Roger Lowenstein |
