Reflections on a Dow: Revisited

The Dow broke the sixes today, down 300 points to close at 6763 points. As I said last week, it was not impossible and here we are already. Now we are back to 1997 levels, we are now past Bush and back in Clinton! Reality Check. I thought I would look into the Dow a little further to try to understand some of the history. I have run some of these numbers in a previous post but I refer to them more in detail today as I again try to understand the specs and put the whole stock market thing into some historical context. What does all of this numbers posturing mean as I watch the Index begin to majorly tank again?

At the beginning of the last century, the Dow was around 50 points. From 1901-1990 it increased 2950 points winding up around 3000 at the beginning of the 1990s. It has spectacularly increased since 1990. From 1990-2007, the Dow increased over 10,000 points even after dropping down to 7600 points in the Fall of 2002 when the Tech Bubble finally burst for good. This is a significant statistic: 90 years to increase 2950 points, 17 years to increase 10,000 points. The last 17 years have been all the more artificial because of all the available cheap capital.

We racked up incredible wealth in a small number of years if we look back at stock market history. Even the WWII boom increased the market from around 140 points in 1944 to the 700s in the early 1960s. For all of the conversation about the Great Depression, the DJIA was at a high of 381 points when the market crashed in 1929 when it slid down to slightly less than 200 points. Despite numerous efforts to power a reversal, the index finally hit a low of 41 points in mid 1932. After that it had its moments regularly peaking and troughing between 1960 and 1980 reaching a low of 535 points and a high of 1051 points during that 20 year period.

The DJIA began in earnest to steadily ratchet up under Reagan and added approximately 2000 points between 1981 and 1991. The major dip during that period was black Mondayin October 1987 when the market plunged nearly 1000 points from a highpoint of 2722 points. It gained over 8000 points between 1991 and 2001 rising from 2500 in 1991 to the 6700s in 1997 - where we are now - and upward to just shy of 11,500 at the end of 1999 gaining 9000 points under Clinton and a pronounced gain between 1997 and 1999 thanks to the tech boom which corrected itself in 2002 landing the market at 7600 points. This was shortlived and the market nearly doubled adding another 6400 points in 5 years to a high of 13930 in Oct 2007.
It has fallen ever since and here we are now.

So the swings that we are becoming "used to" these days of several hundred points up or down and into almost 1000 point peak to trough swings in one day cannot possibly be true commerce and therefore is no longer any indicator of where the market should or should not be. Unless you are one of the lucky to have had enough money to weather the current downturn or you have a good union type job with a pension, all of the wealth created since the turn of this new century has been wiped out completely putting the Dow back to 1990s levels.

By that reckoning, we have much more to bleed to bring business and building back to those levels. The problem is that you cannot do it without leaving too many relics i.e. abandoned big box store shopping centers. Most of us in the middle class just woke to the fact that we never had any real money to spend; we simply did not realize how hard it would be to pay back all of that debt; rolling into the mortgage and feeling no pain was just the luck of the draw and you did it if you could. Besides, wasn't it good for America?

We really didn't earn anything. We simply spent money that we didn't really have - debt - and now we have to pay some of that down before we can go on. I am trying to remember the last time I was better off...ah yes, the 1990s was it for me.