Let's Get High

By DAVID MOON, Moon Capital Management
October 8, 2006

The Dow Jones Industrial Average first crossed the 1,000 barrier in the middle of a trading day in 1966. I suspect that it wasn't long before some self-appointed guru began touting 'Dow 3,000,' which did eventually happen, but not for another 24 years, in 1990.

Well, as they say in economics school, if you predict a number, don't give a date. And if you give a date, don't give a number.

After crossing the 1,000 level, the Dow quickly retreated back below the milestone. When the index flirted with 1,000 again in 1968, I wonder if it was treated as big economic news? What about 1969? Or the times it flirted with the 1,000 barrier in 1972, 1973, 1976, 1980, 1981 and 1982?

After first reaching 1,000 in 1966, the DJIA broke through the 1,000 barrier for what I hope was the final time in 1982.

I met a Knoxville physician in 1988, a few months after the DJIA declined from 2,722 to an intra-day low of 1,677 in the crash of 1987.

By the time we met, the market had recovered to around the 2,200 level. He had sold all of his stocks on October 19, 1987, the day of the crash, and said he wouldn't recommit any capital to equities until the DJIA dropped back to 2,000.

It never has.

Ironically, this doctor didn't put a penny back into stocks for more than a decade ' until January 2000, just in time for the next market crash. He bought almost all technology stocks, too.

Sadly, every bit of this story is true.

Now CNBC is fascinated with the Dow's latest all-time high. So what? The index is comprised of just 30 stocks. It is impossible to draw any meaningful investment conclusions based on the DJIA's gaining or losing five points tomorrow.

If you had gotten terribly excited in 1966 when the DJIA reached a new high and broke the 1,000 level, you might have felt pretty silly when you were still celebrating the same accomplishment 16 years later.

The record high the DJIA breached this week is six years old, set in 2000. It hardly seems like a cause c'l'bre.

This could be like 1972, one of the several times the DJIA set a new high, only to retreat. Or it could be like 1982 (DJIA 1,000) or 1987 (DJIA 2,000) when the popular index irrevocably broke through otherwise meaningless psychological milestones ' on its way to new, permanently higher lows.

By the way, James Glassman's hot 2000 book, 'Dow 36,000,' can be purchased on Amazon.com for 55'.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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