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Politics : Welcome to Slider's Dugout -- Ignore unavailable to you. Want to Upgrade?

To: micdundee2 who wrote (2531)	10/2/2006 12:30:05 PM
From: RonMerks	Respond to of 50292

Propping up the DOW for the elections. MARKET WATCH: Dow Ready to Top Last High RR&A Market Letter by Ritholtz Research & Analytics 230 Park Ave., New York, N.Y. 10169 Sept. 26: As markets march higher, we note the short-term factors at work: window dressing-funds buying more of their favorite stocks to improve their short-term performance...; there is a surfeit of cash in the hands of fast traders; expect them to chase momentum ...; technical analysis and intermediate-term trend remain constructive. Those are up against longer-term issues of economic softening and market internals: real estate, continues decelerating; market advances have taken place on lower-than-average volume; energy is oversold, and likely to bounce upward; [a] double top may present a formidable barrier ( an upside penetration could create a bull trap); despite the Dow rally, new highs are lagging while the number of new lows are expanding; fewer stocks are participating in the advance: Indeed, this rally is very Dow-centric, meaning it's focused more and more on fewer and fewer stocks...as the Dow [hit] its all-time high, the other indexes are further away. This is no coincidence. Dow vs Money Market (Since Peak) On Wednesday, we looked at the breakdown of Dow components, surprised to discover that only 10 of the 30 Dow components were above their 2006 2000 highs. Four stocks -- Boeing, United Tech, Caterpillar and Altria -- were the primary drivers, pulling the Dow higher despite the drag of so many other relatively weak components. 15 of the 20 Dow stocks still below their prior highs are down substantially, with GM and Intel off ~60%, and Microsoft still down by 51%, and Home Depot and Merck off ~ 40%. But before we get too excited about the new highs on a closing basis -- perhaps even today? -- perhaps we should look at the actual real performance of the Dow. Consider what happened if you actually held these 30 stocks (individual issues or through the Diamonds) since January 2000: After 6 1/2 years, you are now almost breakeven on a nominal basis. If you reinvested the dividends from the Dow, you would be up 12.7%. On a real basis, adjusted for inflation, you are actually down 19%; With reinvested dividends, you are down around 9%. If you were lucky enough to sell back in January 2000, and you instead simply placed the money in a cash fund (money market), you would be up ~20.87% on a nominal basis; On a real basis, you are up just under 2%. So while everyone on TV is celebrating the new highs, I can't help but think: Yeah! We only underperformed cash by 818 basis points! Yeah! That was by Barry Ritholtz. Here is a telling chart. Has it dawned on everyone that Gold and Oil stocks could end up down for the year and the DOW up ? Only 90 days to go! Ron