Why the Bull Market in Stocks Really Ended a Long Time Ago
Thursday, January 31st, 2008
By Michael Lombardi, MBA for Profit Confidential
Most market analysts tell us we have been in a bull market in stocks from 2002, when the Dow Jones Industrial Average was just below 8,000, until October 2007, when the Dow Industrial peaked at its all-time high of 14,279. I beg to differ.
In my humble opinion, a 16-year bull market in stocks that started in 1974 ended in early 2000, when the Dow Industrial peaked in January of that year at just over 11,700. How can I say this when 14,279 is a higher number than 11,700? Well, it all depends in what currency we are talking.
To Americans, the Dow Industrial did peak this past October when it closed at a record high of 14,279. To rest of the world, when you measure the Dow Industrial in almost any currency other than the U.S. dollar, the Dow’s high of 11,722 in early 2000 was the real high.
The greenback has fallen steadily in value for several years now. If you measure the Dow Industrial in euros, Canadian dollars, Australian dollars, New Zealand dollars, or even British pounds, the Dow Industrial stocks were worth more in early 2000 than they were in 2007!
And if we measure the Dow Jones Industrial Average in real money, gold, we are in for disturbing numbers:
In early 2000, it would have taken 39 ounces of gold bullion to “buy” the basket of the 30 super-big-cap stocks that make up the Dow Jones Industrial Average. By October 2007, when the Dow peaked at 14,279, it would take only 18 ounces of gold to buy the same basket of stocks! The value of stocks that make up the bellwether Dow Jones Industrial Average has actually fallen drastically when denominated in non-U.S. dollars.
Why does it matter to investors when the bull market really ended?
It is important to me because, if this is an ongoing bear market and what we really experienced from 2002 to 2007 was a rally within the confines of a secular bear market that started in early 2000, then this next phase of the bear market will be a long, drawn-out affair delivering lows for the Dow below the 8,000 it experienced in 2002.
The world is changing. After having the supreme world currency since World War II, the balance of currency power is shifting away from America. We have gone from being a creditor nation to a debtor nation. And with that, the great prices big-cap U.S. stocks once demanded may not return for years.
Next Post: The Story of How Sam Walton Started the Bull Market in GoldPrevious Post: Often-Ignored Industry Has Staying Power
Tags: bear market, bull market, Dow Jones Industrials, U.S. Dollars
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Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter




