[roccman]

According to Barron's they are now at -81.34 and the P/E Ratio form of measure is now N/A.

Got gold?

[frankthetank]

Can u elaborate a little on what this chart is saying...? I really don't have a clue!

[FrankRichards]

Can u elaborate a little on what this chart is saying...? I really don't have a clue!

I believe it says that the combined net profits of the 30 companies are negative. The thread title is misleading, although I'm having trouble coming up with a better one.

[BigTex]

I don't know where that figure came from, but I think it's misleading.

I looked at the 30 companies in the index, and it looks like the average earnings are really only being pulled down by a couple of the financials and GM.

It looks like more than 25 of the companies have positive earnings.

However, depending upon how you calculate it, GM's loss alone could wreck the whole average, since GM is showing a loss of $74 per share and is trading at $10 per share. That alone would be enough to skew the average earnings down, but that's just one company.

I would like to see what the DJIA's earnings look like without GM.

[Cashmere]

It's a graph.

In my opinion, if a graph represents a complete data set, then the graph itself cannot be misleading.

Perhaps it can be argued that the dataset that was selected is misleading.

For example, if you did a graph of all likely voters, but you had a squirrelly definition of "likely", then that would be misleading.

This graph, IMO, couldn't be more straightforward, unless the $ amount on the y-axis was given.

DJI total earnings.

That is, you add up all the earnings and losses of all the companies on the Dow, and you plot it for that time point.

Simple.

I suppose it could be said that the data are <i>skewed</i>, but I don't think misleading.

Thanks for posting RM.

By the way, the most interesting thing to me about this is the rapidity with which the cliff was traversed.

The main reason that you don't see dips below zero at any point since the graph begins during the 1st Great Depression is because the folks who run the DJ will pull companies off the Dow as soon as they show repeated bad performance. It happens all the time. GE is the only company that was an original member of the DJIA that is still included.

So, to me, what this graph really shows is the rapidity of the change.

Bad news shown in vivid imagery.

[roccman]

I don't know where that figure came from, but I think it's misleading.

Here...as a side note- I think calculating the DOW is BS...when one of the 30 companies is not performing well - it gets replaced...kinda like the CPI...just put something in the basket that makes your numbers look good.

[BigTex]

I guess I would find it more alarming if 30 companies had negative earnings, rather than 27 companies having decent to good earnings, two with bad earnings and one with incredibly awful earnings.

A median per company to go with the index's totals might be helpful too.

I think a lot of the losses that are showing up at GM are also bad stuff on their books that they are trying to clear off now rather than later, on the theory that who cares whether your losses are $40 or $80 per share?

I thought WAMU's strategy of basically doubling the number of outstanding shares to raise capital earlier this year was brilliant in a twisted way. When you have losses, issuing more shares will show a smaller PER SHARE loss, which can provide a way of disguising how bad things are to some investors.

Thanks for the chart though Rocc. It's interesting that this isn't being discussed anywhere else.

[cube]

Got gold?

Yes. Bought it in 1980. Can you tell me how much longer I have to wait before it gets back to the equivalent of the price I paid for it?

I placed my entire life savings on the dow jones in October of 2007.
How much longer do I have to wait till I get my money back?

[roccman]

Thanks for the chart though Rocc. It's interesting that this isn't being discussed anywhere else.

No problemo senior...always trying to raise the bar 'round here ya know.

[Cashmere]

Got gold?

Yes. Bought it in 1980. Can you tell me how much longer I have to wait before it gets back to the equivalent of the price I paid for it?

That's cute.

I love it when the anti-gold crowd picks the high point of the last 40 years as their selected data point for trying to show that gold is a "bad investment".

If you bought in 1980, then you made a very unsophisticated purchase. So sad.

If you bought anywhere before 79 or after 80, then you have done quite well preserving your wealth.

Gold is not an "investment", in my view - it a store of wealth.

If you bought in 04, then you have doubled your nominal value.

But more importantly, where would you put your money now if not in commodities?

Pick a stock on the NYSE and I'll pass.

For my money, I'll buy what people need - commodities - or a store in value - metals - not what people can do without - all of the crap advertised on google, Coke, McDonalds, GE trinkets.

[Tyler_JC]

The DJIA has to allow for the replacement of failing companies.

* American Cotton Oil
* American Sugar
* American Tobacco
* Chicago Gas
* Distilling and Cattle Feeding
* General Electric
* Laclede Gas
* National Lead
* Tennessee Coal & Iron
* North American
* U.S. Leather
* U.S. Rubber

Those were the original 12. Do any of those companies with the exception of GE even exist anymore?

The S&P 500 is generally a better measure of the performance of the stock market because it uses a larger base. Even the S&P has a nasty habit of including too many bubble stocks.

Yahoo! was added to the index when it was trading at over $100 per share in 1999 (2000?).

The Wilshire 5000 is an index of ALL of the shares of every company traded in the United States.

I've looked at charts comparing the two broad indexes and they actually trace each other quite well.

Unfortunately, the DJIA stopped tracking the S&P after the tech boom.

Dow Versus S&P

When mutual funds measure their success, they talk about success versus the S&P, not the Dow. The Dow contains 30 extremely well known companies but is too limited to give a real overview of the stock market.

The net losses of the DJIA are an indication that the Dow includes too many financial companies (5 out of 30). Bank of America was added in February of 2008, just before it started losing billions of dollars. Honeywell was taken out of the index despite its continued profitability.

If you go back to the index used before the Honeywell/Bank of America switch, we would be up another couple hundred points.

Long story, short. Feel free to use the S&P 500 as a gauge of the stock market and ignore the foolish DJIA.

[BigTex]

Permanent Portfolio (PRPFX).

23 up years, 3 down.

Doomer sleep aid.

[cube]

Got gold?

Yes. Bought it in 1980. Can you tell me how much longer I have to wait before it gets back to the equivalent of the price I paid for it?

I placed my entire life savings on the dow jones in October of 2007.
How much longer do I have to wait till I get my money back?

Don't know....but way bad call for anyone with Doomeristic tendencies. I was busy pulling out of the market when it cleared like 12,700-13,200....having been burnt by silly "buy gold" bs back in 1980 I wasn't about to let something that stupid happen again.

ooh you're so smart!
You should quite your day job and become a full-time speculator seeing you're so good at calling the shots.
How about sharing some of your wisdom with me.
So where should I put my money now?
Should I:
short the DJIA?
Buy gold?
what next?

[Twilight]

Buying gold at this level is stupid. You may think it is money, but it is just a liquid vehicle to people much bigger than you, with positions much bigger than yours. Once they dump to cover the implosions beginning to ripple through their investment assets, you will be screwed. And dump they will, if they can wipe out a bad bet with one that may have a 200% profit or more. I do not see this as a perpetual hedge, it will be used in the end. A real crash will result in the mother of all visits to the pawn shop. Gold is really starting to sound more like mainstream hysteria than rational thinking.

[Tyler_JC]

Shorting the DJIA is a bad idea because the index is designed to over-perform the general market.

When they finally take GM out of the index and replace it with Google or Berkshire Hathaway, the index can continue to march upward. The actual index itself is too easily affected by changes in membership to be a useful gauge of the US economy or even just the stock market.

[roccman]

What are you talking about? I lost my pants buying gold in 1980 listening to commodity crazies like Roccman,

Naw bro - you were late and lost your ass.

I have and continue to be early.

Got food?

[cube]

Buying gold at this level is stupid. You may think it is money, but it is just a liquid vehicle to people much bigger than you, with positions much bigger than yours. Once they dump to cover the implosions beginning to ripple through their investment assets, you will be screwed. And dump they will, if they can wipe out a bad bet with one that may have a 200% profit or more. I do not see this as a perpetual hedge, it will be used in the end. A real crash will result in the mother of all visits to the pawn shop. Gold is really starting to sound more like mainstream hysteria than rational thinking.

*getting serious now after enjoying a good laugh with MattS....he sure knows how to play along*
Markets go up and down.
Whether tulip flowers, dot com stocks, real estate, and yes even today's commodity's bull market will hit a peak and go down just like everything else that came before it.

*however*
I do NOT think we have reached the top of this commodity's bull market.
A bull market in commodities tends to last much longer so we're only halfway there. The reason is simple, it takes much longer to ramp up production of commodities. A new oil well or gold mine cannot be brought into production in 6 months. If it only takes 6 months to open a new dot-com company or build a house that's why after only 6 years the market is over-saturated and has reached its peak. That's why the dot-com bubble and real estate only lasted for 6 years.
Even if you do not believe in PO and are convinced there's an oil reservoir the size of Texas somewhere on this planet you have to admit it is physically impossible to over-saturate the world oil market in 6 years. It doesn't matter if ALL the world's oil drilling rigs are working 24/7/365 ---> the world will not be swimming in oil in 6 years.
Maybe 12 years but not 6.
Since this bull market has only been going for 6 years that means it's only at the halfway point.
This is my true and honest opinion.
*Let me clarify*
I am NOT telling anyone where they should invest their money.

[roccman]

What are you talking about? I lost my pants buying gold in 1980 listening to commodity crazies like Roccman,

Naw bro - you were late and lost your ass.

<hanging head in shame>

Yup.....so your advice to do it all over again is less than useful.

It was "got" gold...

Not

"get" gold...

As in past tense.

Fool me once shame on you ...fool me twice shame on me...

Let's try a new exercise...that you actually may get ahead of the curve...

wait for it...









got food?

[cube]

A new oil well or gold mine cannot be brought into production in 6 months. If it only takes 6 months to open a new dot-com company or build a house that's why after only 6 years the market is over-saturated and has reached its peak. That's why the dot-com bubble and real estate only lasted for 6 years.
Even if you do not believe in PO and are convinced there's an oil reservoir the size of Texas somewhere on this planet you have to admit it is physically impossible to over-saturate the world oil market in 6 years. It doesn't matter if ALL the world's oil drilling rigs are working 24/7/365 ---> the world will not be swimming in oil in 6 years.
Maybe 12 years but not 6.

Numbers game!! 1 oil well takes 15 days to drill, another 15 to complete and start production. 1000 rigs in America drilling for natural gas stop, and start drilling the new oil discovery the size of texas.

12 wells/year/rig, 1000 rigs, 12,000 new wells in a new Ghawar in a year, making Ghawar volumes of 20,000 bbl/day/well, X 12,000 new wells = 240 Million Barrels/ Day phased in over ONE year.

Yeah...I think you need a smaller example of how fast things CAN'T be done. Those kinds of volumes can saturate this planet and a couple of others.....

only 15 days to drill huh?

[BigTex]

In the 1970s, if 25% of your investments had been in gold, you would have been up big for the decade.

In the 1990s, if 25% of your investments had been in stocks, you would have been up big for the decade.

It's not necessary to commit everything to one asset class to get a good overall return.

Got diversification?