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Bulls, Bears, Weasels, and Jackasses

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Wall St. is like herding cats!

Friends, as I am watching “the news” tonight, I am hearing of what’s being called a “troubling development” for the Romney/ Ryan team- the Dow is up… Oh, happy days are here again!!!!

This is a meme I’ve already been hearing from some of my more lib-o-tarded acquaintances. The Dow index dropped 50% under Bush, but has doubled under Obama, almost totally recouping its losses in the Financial Crisis. The Dow is now higher than when Bush left office. Whoop! Whoop! So I got curious.

The Dow Jones Industrial Average (DJIA, “the Dow”) has a long history that started in 1896 with nine stocks that were in an imaginary portfolio. At the end of the day, the prices of those nine stocks were averaged to form the index and show you how much imaginary money you made (or would have made). Part of the reason for this was to lend credibility to the stock market, which was not too well regarded back then. I mean all good conservative investors bought bonds, which made a promised and predictable return on investment and were backed by hard assets! By the way, how’d those GM bonds, backed by hard assets, work out for all the “conservative investors” when the SCOTUS overturned two-hundred-and-some years of precedent in contract law and put the union in front of them when GM went belly-up?

-Jumping way ahead-

Today, the Dow index is comprised of 30 stocks in different industries, to try to reflect the overall economy. Not to get too far into the statistical details, but a “divisor” is applied to the actual stock prices. Well, not that we could get too far into the details- Dow Jones is a private company that makes money by figuring all this crap up for us. Their exact means and methods are proprietary, and I don’t blame them for trying to make a buck.

Here’s the key- what are those 30 stocks? I’ll give you a hint- they ain’t the same stocks as they were in 1896. Not even in 2008! Again, the Dow index is the performance of an imaginary stock portfolio, washed over with statistical methods.

On June 9th, 2009, General Motors filed for Chapter 11 bankruptcy. Guess what day it was magically plucked out of the Dow and replaced with another company? Yup. How did the statisticians account for suddenly losing 100% of their imaginary investment in GM? Who the heck knows!!! But I guaran-damn-tee you that losing 3.3% of your portfolio in a day has to hurt!

I give the folks at Dow Jones credit for trying their best to do what they’re trying to do- establish some kind of baseline for the stock market. But out of the 30 DJIA stocks, only 25 were on it when Obama was elected. Think about that- the Dow has had a 17% change in composition from the bottom of the crisis. In fact, only 6 of the DJIA companies- that’s only 20% of the index- predate Carter. And of those 6, all but one were added before WWII (think Great Depression). GE is the only company in the original Dow that is still in it.

Dow Jones tries to be the arbiter of the horse race. Fine. But when the rider can change horses in the middle of the race? How do you handicap that? What’s that do to the odds? Who knows, and who knows how they try to compensate for it in their black box calculations? Another example- AIG was removed from the Dow in September of 2008, having lost more than 98% of its share price. Bank of America had only been added in February of 2008, at a price of around $40 a share, before it plunged to around $4 a share in September of that same year. Honeywell, which BofA replaced, “only” dropped by about 50% and has mostly recouped its loss in share price. And Honeywell did it without receiving $45 billion in TARP loans, and $118 billion in US government loan guarantees like BofA got. Never mind the ongoing gravy train of “government money” (our tax dollars!) going to “refinance” mortgages, and Fannie Mae and Freddie Mac mortgage purchases, which bolster BofA’s position, which at the close of business today stood at less than $9 per share.

So, my underlying point is this- is the Dow a true measure of the real economy? How can it be?

Maybe some of our Dudes and Dudettes can help come up with some straight-up, to-the-point retorts that anyone can understand to use against the lib-o-tards when they start spouting **** like this. That’s one of my goals in researching and writing this. The other goal is to help directly convince anyone who thinks that the economy is somehow turning around under Obeyme- ahem, Obama.

“W” Bush left office with the Dow at $12,650. Ground chuck was on sale at the grocery store for $1.49/lb. The Dow closed today at $13,440. Ground chuck went on sale at the grocery store last week for $2.99/lb. Gold was around $1,000. Now it’s around $1,800. What’s that tank of gas costing you today?

Why is the Dow up? Could it have something to do with the Fed devaluing our currency to hold interest rates at less than 1%? Well, capital ($$) seeks return. Higher risk is supposed to equal higher return. Since bondholders are no longer safe, and mortgages are now risky, money flocks to where it can eke out a measly 4% return on investment. That includes offshore investment money, too. I’ll sell you a bridge in Greece! Cheap! Hell, it might become a historical monument- there was a riot there just last month. Where is the world’s money going? Ain’t the Euro!

Today, your share of the Federal Debt stands at $51,091. Yours. Not your household’s, not your kids’, but yours. If you’re one of the lucky few who pay taxes, your share works out to $140,000. That’s about 78% higher than it was when Obama took office, less than 4 years ago. What do you and I have to show for it?!?

*Disclaimer- Dow Jones, DJIA, “the Dow,” Bank of America, Honeywell, GE, Greece, General Motors, etc. are all registered trademarks of their respective owners. Hell, “da fedral gubmint” probably is, too… TM’s used under fair use standards without permission.

We have to have some non-sucketh music, so here’s Flunk’s wonderful cover of New Order’s “Blue Monday”:

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17 Comments

  1. SPURWING PLOVER

    Obama and his fellow demacRATS deporting all of americas job or having them done by illegal alien This is a act of TREASON and a impeachible offense

  2. Excellent explanation of the whole Dow Jones thing.Thank you

  3. Excellent, spot-on post stranger.

    I follow all that you speak of…you hit the nail on the head and then some. Hope others take a good read of this…it’s an eye-opener.

    Night all ~ Got to hit my head on my favorite pillow.

  4. “Maybe some of our Dudes and Dudettes can help come up with some straight-up, to-the-point retorts that anyone can understand” – Inagada Davida

    The most important indicator of the economy is GDP, then Consumer Price Index (CPI) and The Producer Price Index (PPI), and Employment Indicators, and Retail Sales Index, and The National Association of Purchasing Management index (NAPM), and Consumer Confidence Index, and Durable Goods Orders, and Employment Cost Index (ECI).

    Now all of the above are indicators of the economy and must be taken as a whole and can’t be cherry picked if one wants a best guess.

    The Dow Jones Industrial Average (DJIA) is an indicator of the stock market as you explained and is not a leading “ECONOMIC” indicator.

    One might as well plug the DJIA into a global warming computer model if you want the economic answer to fit the question, without all the facts.

    Figures don’t lie… But liars will figure

    • Inagada Davida

      Waspish,

      I ain’t against you, brother, but… well, I think you and I are on the same page. I learned the old “CGI” version of GDP. Consumption + Government spending + Investment. Nowadays, they’ve added (as they should) “X” and “M.” eXports and iMports, or our trade balance. Gubmint spending is now, what? … 40% or more of our GDP? What’s the trend there?

      Consumer Price Index is another “official” figure that has been manipulated forever… one of the latest ‘corrections’ to this is to figure in ‘substitution,’ i.e. if beef goes up you’ll just buy more chicken.

      ‘Official’ unemployment number calculations have been changed three times since Obummer got in. Keep changing the rules and things will get better! Right?

      I’m just sayin’, all these numbers are artificial and manipulated. “The future’s so bright, I gotta wear shades!”

      As I say, a recession is when your neighbor loses his job. A depression is when you lose your job. An election is when Obummer loses his job!

      • I think you are a great deal more knowledgeable on this subject than myself. Right or wrong I have always considered economics no more than theory, any factual information seems based on hindsight, maybe it’s prognostications and forecasts are just too confusing for me to fully grasp.

        Whether we understand the forces involved or not, we are affected as individuals.

        So when Barrack Hussein Obama says “The economy is just fine”… it is for him.

        But for the rest of America it’s a different picture,

        I made a friends and family list, and was immediately disheartened by the number of people on that list without jobs. Two thirds of people I have social contact with are unemployed, and that is enough economic fact for me to cast a vote against President Obama.

        As always I enjoy your posts,

        Also I saw Rand Paul on Squawk Box the other day and I liked what he had to say.

  5. The Dow has always been an illusion, house of cards, its gonna go down. Stock up on
    hardware, guns,knives and bullets and a big pack to carry them in.

  6. Rush Limbaugh is correct: when Obama is elected for his second term (and the fix is in), we will have a financiual crisis within 6 months. Obama will consolidate power during this “crisis” and declare a national state of emergency.
    “U.S. monetary policies will destroy the world” -Mark Faber

    “The resulting chaos is going to crush Americans.”

    Faber Warns “Everything Will Collapse”
    Money Morning
    By Money Morning Staff Reports

    Famed economist Marc Faber appeared on Bloomberg TV with a harsh, direct warning to investors.

    “U.S. monetary policies will destroy the world,” he said, referring to the new round of stimulus – QE3, or “QE Forever” – the Fed plans to launch this year.

    As the publisher of the influential Gloom Boom & Doom report, Faber is well-known for making ominous predictions. Many regard him as the first to warn investors to get out of the stock market one week before the October 1987 crash.

    And since the 2008 meltdown, he’s been a fierce critic of the Fed’s policy of money printing, arguing it only creates a phony recovery.

    So it wasn’t surprising to hear him speak out against Bernanke’s most recent stimulus plan, quantitative easing or QE3.

    What was surprising – and frightening – was the level of wealth-destruction he believes will occur.

    According to Faber, “eventually we will have a systematic crisis and everything will collapse.”

    Faber couldn’t pin down the timing of his alarming prediction, but said the bigger concern wasn’t when the economic storm will begin, but how high the market will go until then.

    http://moneymorning.com/ob/faber-warns-everything-will-collapse/

    “I think we’re in a rat’s alley, where dead men lost their bones”

  7. On another note:
    The American people had their chance!
    When the wheels came off at the end of Bush’s 2nd term, it was real obvious that something was up when the greatest financial criminal fraud and theft IN WORLD HISTORY occured and the bailouts started. There should have been Wall St. arrest and revolution!
    Americans chose to drup up and watch sports, porno and play video games and stay nice and cozy in their little comfort zones.
    Well, I hope people are ready for it, the country is lost!

  8. The stock market is and always has been a “casino”. It uses greed to fleece the participants and nearly everyone loses but the handful who have always been involved in it. Money in the bank or in your pocket will always be with more than a piece of paper with some imaginary value on it. Can anyone remember the savings and loan institutions of the past? They were systematically shut down so the general populace would have to either store yur money at your house or follow some imaginary dream of becoming an investor millionaire. It has become a tool for redistribution. Nothing more, nothing less, only a fool would trade real money for worthless paper.

  9. Great post Inagada Davida. Most times when I read stuff like this, my brain kind of goes into a ‘sleep mode’. I don’t understand most of it, but I am trying to learn it. I certainly understand the federal government borrowing forty cents of every dollar they spend and how that cannot continue. The fiscal aspect of our countries demise may often times be lost on those like me.

    It’s good that you post info like this so we can try to understand it.

  10. The DOW Index might be near the pre-recession high……

    BUT….

    Each individual mutual fund that I own is still down 20%……

    and these mutual funds mirror the reality that most investors see.

  11. Obama and his entire administration possess a third world mentality and basically have no interest in encouraging Americans in investing in their own future.

    Their overall aim is to promote a self-styled “interconnected global economy” which pretty much rejects the idea of insourcing jobs. Come to think of it, Romney hasn’t given any real indication that he too opposes “offshoring” American jobs either!

    The economic decimation which has occured under the lackluster presidency of Hussein Hope Change leaves much to be desired. No longer can rely solely on the Dow as being the initial indicator of how our future economy.

    Most Americans are invested in the Stock Market and own some form of equity. At the end of the day, the more wealth an individual accumulates, the less inclined he/she will be in investing in multiple businesses.

  12. Of course it is cherry-picked and manipulated, just like the “consumer price index” that the 0 claimed showed No inflation for three years, thanks to manipulation like dropping energy from the “index”. Another manipulation was someone, I forget who, claiming that there was no inflation because “people will switch from steak to hamburger.”

    Unfortunately, as we all know; there Is inflation, massive inflation -but that’s okay, we can just switch from eating bread to eating sawdust, right?

    Further, compared to actual INFLATION, the stock market is not only not rising, it is trending downward -as any gains must (to be Honest gains) subtract the lost value in the actual money Buying the stocks.

    Want to push the DJIA up to 20,000? Just keep churning out toilet paper “federal reserve notes” and watch inflation make stock “values” rise -which is only an illusion because it is really that the dollar’s value is SINKING.

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