# DOW at nearly 23k for first time in history...what is going on? **URL:** \ **Category:** Great Debates\ **Created:** [October 17, 2017, 7:11pm UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148 "2017-10-17T19:11:01Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [October 18, 2017, 5:21pm UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148/41 "2017-10-18T17:21:36Z")
> [@HMS\_Irruncible](#): > > You wouldn’t be willing to explain your reasoning in detail, would you? Oh but of course. CBO ([PDF](https://www.cbo.gov/sites/default/files/112th-congress-2011-2012/reports/10-25-householdincome0.pdf)) report showing growth in real median after-tax income 1979-2007 where EPI shows stagnation. EPI uses CPI to deflate wages and IPD to deflate productivity. Neither is wrong, but it makes comparisons difficult. EPI thinks there is no problem in using both: “We argue that it is valid.” But as I wrote elsewhere, if I’m self-employed and make/produce $10k (nominal) in 1970 and $50k (nominal) in 2000 while working the same, my compensation rate has increased by only 12% if we measure by CPI, but my productivity has increased 38% if we measure by IPD. This article explains: [https://www.bls.gov/opub/mlr/2016/article/comparing-the-cpi-with-the-gdp-price-index-and-gdp-implicit-price-deflator.htm](https://www.bls.gov/opub/mlr/2016/article/comparing-the-cpi-with-the-gdp-price-index-and-gdp-implicit-price-deflator.htm) If we examine the flow of workers into and out of the workforce, we see that change in weekly earnings has been positive over the past 15 years, and even more so for full-time employees. But retiring boomers being replaced by new workers have dragged down the averages. [http://www.frbsf.org/economic-research/files/el2016-07.pdf](http://www.frbsf.org/economic-research/files/el2016-07.pdf) ---
**Author:** ![HurricaneDitka](https://avatars.discourse-cdn.com/v4/letter/h/96bed5/32.png) [@HurricaneDitka](https://boards.straightdope.com/u/HurricaneDitka)\ **Post date:** [October 18, 2017, 5:26pm UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148/42 "2017-10-18T17:26:13Z")
> [@HMS\_Irruncible](#): > > Simple answer - the chaos bill is still in the mail. He’s only been president for 9 months. Things feel chaotic, but most of what we perceive as chaos is a president breaking social norms on social media. The administration hasn’t yet been tested by a serious crisis. … I’d call both the Syrian chemical weapons attacks and the North Korean nuclear tests, and our responses to each, fairly serious. On the domestic front, there have been some pretty devastating storms that have damaged significant infrastructure in a few parts of the country. ---
**Author:** ![RickJay](https://avatars.discourse-cdn.com/v4/letter/r/bb73d2/32.png) [@RickJay](https://boards.straightdope.com/u/RickJay)\ **Post date:** [October 18, 2017, 5:50pm UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148/43 "2017-10-18T17:50:54Z")
> [@HurricaneDitka](#): > > There’s no way to know this. No, there isn’t, but there is no rational, fact-based reason to believe any other state of affairs would be likely. ---
**Author:** ![HurricaneDitka](https://avatars.discourse-cdn.com/v4/letter/h/96bed5/32.png) [@HurricaneDitka](https://boards.straightdope.com/u/HurricaneDitka)\ **Post date:** [October 18, 2017, 6:14pm UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148/44 "2017-10-18T18:14:26Z")
> [@RickJay](#): > > No, there isn’t, but there is no rational, fact-based reason to believe any other state of affairs would be likely. LOL. You aren’t serious, are you? ‘Of _course_ the stock market would have done better under Hillary. How could we _possibly_ conclude anything else?’ :rolleyes: Look, I’m content to leave it at us both agreeing that it’s unknown how the stock market would perform in an alternative universe where HRC had not lost the election. ---
**Author:** ![eschereal](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/eschereal/32/18939_2.png) [@eschereal](https://boards.straightdope.com/u/eschereal)\ **Post date:** [October 18, 2017, 6:35pm UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148/45 "2017-10-18T18:35:49Z")
> [@Ruken](#): > > … But as I wrote elsewhere, if I’m self-employed and make/produce $10k (nominal) in 1970 and $50k (nominal) in 2000 while working the same, my compensation rate has increased by only 12% if we measure by CPI, but my productivity has increased 38% if we measure by IPD.… That seems a bit specious, though. Most workers are _not_ self-employed (AFAICT), so measures of productivity would be inverse. Wages apply negative pressure to productivity (workers are a business expense), so increased productivity does not translate to better pay/conditions for workers. ---
**Author:** ![Exapno\_Mapcase](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/exapno_mapcase/32/1051_2.png) [@Exapno\_Mapcase](https://boards.straightdope.com/u/Exapno_Mapcase)\ **Post date:** [October 18, 2017, 6:48pm UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148/46 "2017-10-18T18:48:32Z")
The Dow will increase faster and faster because each 1000 is now a smaller percentage of the base. The rise from 20,000 to 23,000 is exactly the same as the rise from 200 to 230. The former is psychologically much huger but the percentage increase is the same. The Dow is an artificial number that could be anything. If we divided it by 100 absolutely nothing would change. Let’s do it. Then when the Dow goes up from 230 to 240 nobody at all will notice or care. And nobody will panic when it goes down from 230 to 220. ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [October 18, 2017, 6:53pm UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148/47 "2017-10-18T18:53:45Z")
> [@Exapno\_Mapcase](#): > > The Dow will increase faster and faster because each 1000 is now a smaller percentage of the base. > > The rise from 20,000 to 23,000 is exactly the same as the rise from 200 to 230. The former is psychologically much huger but the percentage increase is the same. > > The Dow is an artificial number that could be anything. If we divided it by 100 absolutely nothing would change. Let’s do it. Then when the Dow goes up from 230 to 240 nobody at all will notice or care. And nobody will panic when it goes down from 230 to 220. Well said. ---
**Author:** ![eschereal](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/eschereal/32/18939_2.png) [@eschereal](https://boards.straightdope.com/u/eschereal)\ **Post date:** [October 18, 2017, 7:04pm UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148/48 "2017-10-18T19:04:53Z")
> [@Exapno\_Mapcase](#): > > The Dow is an artificial number that could be anything. This is the DJIA: [ul][li]3M[/li][li]General Electric[/li][li]Nike[/li][li]American Express[/li][li]Goldman Sachs[/li][li]Pfizer[/li][li]Apple[/li][li]Home Depot[/li][li]Procter & Gamble[/li][li]Boeing[/li][li]Intel[/li][li]Travelers[/li][li]Caterpillar[/li][li]IBM[/li][li]UnitedHealth[/li][li]Chevron[/li][li]Johnson & Johnson[/li][li]United Technologies[/li][li]Cisco Systems[/li][li]JPMorgan Chase[/li][li]Verizon[/li][li]Coca-Cola[/li][li]McDonald’s[/li][li]Visa[/li][li]Dupont[/li][li]Merck[/li][li]Wal-Mart[/li][li]Exxon Mobil[/li][li]Microsoft[/li][li]Disney[/ul][/li] I guess the index is the sum of their common-stock prices. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [October 18, 2017, 7:19pm UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148/49 "2017-10-18T19:19:07Z")
> [@eschereal](#): > > That seems a bit specious, though. Most workers are _not_ self-employed (AFAICT), so measures of productivity would be inverse. Wages apply negative pressure to productivity (workers are a business expense), so increased productivity does not translate to better pay/conditions for workers. Self-employment was just an example of how two measures of inflation give you two numbers where there should be one. I can’t tell you what productivity will translate to. But I can tell you that households have more income than they used to. Whether it is distributed ideally is a different matter. Take a look at that CBO report and see how the increases look for different income quintiles. If you’re the type who is many concern about income inequality, it certainly shows unequal gains. ---
**Author:** ![Ludovic](https://avatars.discourse-cdn.com/v4/letter/l/7ab992/32.png) [@Ludovic](https://boards.straightdope.com/u/Ludovic)\ **Post date:** [October 18, 2017, 7:24pm UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148/50 "2017-10-18T19:24:44Z")
> [@eschereal](#): > > This is the DJIA: > [ul][li]3M[/li][li]General Electric[/li][li]Nike[/li][li]American Express[/li][li]Goldman Sachs[/li][li]Pfizer[/li][li]Apple[/li][li]Home Depot[/li][li]Procter & Gamble[/li][li]Boeing[/li][li]Intel[/li][li]Travelers[/li][li]Caterpillar[/li][li]IBM[/li][li]UnitedHealth[/li][li]Chevron[/li][li]Johnson & Johnson[/li][li]United Technologies[/li][li]Cisco Systems[/li][li]JPMorgan Chase[/li][li]Verizon[/li][li]Coca-Cola[/li][li]McDonald’s[/li][li]Visa[/li][li]Dupont[/li][li]Merck[/li][li]Wal-Mart[/li][li]Exxon Mobil[/li][li]Microsoft[/li][li]Disney[/ul][/li] > I guess the index is the sum of their common-stock prices. It is, but it’s adjusted every time a stock is added and dropped so the index doesn’t jump suddenly when this happens. ---
**Author:** ![doorhinge](https://avatars.discourse-cdn.com/v4/letter/d/a5b964/32.png) [@doorhinge](https://boards.straightdope.com/u/doorhinge)\ **Post date:** [October 18, 2017, 8:25pm UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148/51 "2017-10-18T20:25:30Z")
> [@RickJay](#): > > Yes, it would. > > If he torpedoes NAFTA, things will start to shake. (post shortened) How could you possibly know for sure? The DOW, as well as the rest of the stock markets, go up when really deep pocket investors believe stocks will provide the highest rate of return for their money. Stock prices go down when really deep pocket investors opt for the safety/stability of other investments. How do you know that really deep pocket investors would chose to invest in stocks instead of some other investment vehicles providing, of course, that Hillary hadn’t lost her 2nd bid for POTUS? Would really deep pocket investors have as much faith in the future of stocks with a Hillary in the Whitehouse? As far as NAFTA is concerned, Canada, the U.S., and Mexico were doing business before NAFTA, and they will continue to do business after NAFTA is modified, or dissolved. Some people have been predicting a slump in the economy ever since they were surprised that anyone could beat Hillary a 2nd time. I suppose the stock market will collapse some day, eventually, maybe. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [October 18, 2017, 9:41pm UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148/52 "2017-10-18T21:41:09Z")
> [@doorhinge](#): > > I suppose the stock market will collapse some day, eventually, maybe. Can I quote you on that? 😉 ---
**Author:** ![Exapno\_Mapcase](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/exapno_mapcase/32/1051_2.png) [@Exapno\_Mapcase](https://boards.straightdope.com/u/Exapno_Mapcase)\ **Post date:** [October 18, 2017, 10:04pm UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148/53 "2017-10-18T22:04:02Z")
> [@eschereal](#): > > This is the DJIA: > > I guess the index is the sum of their common-stock prices. Oh, naïveté. Here’s [an explanation of the Dow](https://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average#Calculation). ---
**Author:** ![HMS\_Irruncible](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hms_irruncible/32/7394_2.png) [@HMS\_Irruncible](https://boards.straightdope.com/u/HMS_Irruncible)\ **Post date:** [October 18, 2017, 10:18pm UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148/54 "2017-10-18T22:18:58Z")
> [@HurricaneDitka](#): > > I’d call both the Syrian chemical weapons attacks and the North Korean nuclear tests, and our responses to each, fairly serious. The responses to each were minimal. (Which arguably was the best response). For NK we had a Twitter tantrum and some fly-bys. For Syria we had the “do-little raid” which could be characterized, in the words of Bush the Lesser, as “shooting a million dollar missile to hit a camel in the butt”. Syria has lost no chemical warfare capacity and nothing is stopping them from attacking again. > [@](#): > > On the domestic front, there have been some pretty devastating storms that have damaged significant infrastructure in a few parts of the country. I was talking about international and economic crises, but since you bring it up… hurricanes are severe, but for a presidency, this is not rocket science. You dispatch FEMA, you request additional funds. He met the minimal requirement for Harvey and Irma, but Puerto Rico is an unfolding catastrophe, and Trump’s blaming the victims and talking about pulling the plug on support. Utter fucking fail. This gives you a hint about what Trump will do in a crisis. He will cast the victims as undeserving, he will do nothing or the minimal amount. That’s a decent answer when it comes to starting a war, but it won’t be the right answer for everything. What would interest me as a crisis would be a bubble deflation, a trade shock, a major overseas invasion/incursion or act of war, or a terrorist attack targeting numerous Americans. Those are crises. Everything so far is just the regular headaches of holding the office. ---
**Author:** ![Tom\_Tildrum](https://avatars.discourse-cdn.com/v4/letter/t/e95f7d/32.png) [@Tom\_Tildrum](https://boards.straightdope.com/u/Tom_Tildrum)\ **Post date:** [October 19, 2017, 12:31am UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148/55 "2017-10-19T00:31:42Z")
> [@Exapno\_Mapcase](#): > > The Dow will increase faster and faster because each 1000 is now a smaller percentage of the base. > > The rise from 20,000 to 23,000 is exactly the same as the rise from 200 to 230. The former is psychologically much huger but the percentage increase is the same. > > The Dow is an artificial number that could be anything. If we divided it by 100 absolutely nothing would change. Let’s do it. Then when the Dow goes up from 230 to 240 nobody at all will notice or care. And nobody will panic when it goes down from 230 to 220. Presumably, however, you don’t mean to obscure the fact that the Dow has risen 25% in less than a year. If not unprecedented, this is certainly extremely unusual, regardless of the absolute level. ---
**Author:** ![nearwildheaven](https://avatars.discourse-cdn.com/v4/letter/n/90db22/32.png) [@nearwildheaven](https://boards.straightdope.com/u/nearwildheaven)\ **Post date:** [October 19, 2017, 12:35am UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148/56 "2017-10-19T00:35:54Z")
MHO: We’re in a bubble. I am not looking forward to when it bursts. ---
**Author:** ![octopus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/octopus/32/3716_2.png) [@octopus](https://boards.straightdope.com/u/octopus)\ **Post date:** [October 19, 2017, 12:43am UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148/57 "2017-10-19T00:43:52Z")
> [@septimus](#): > > I think these are key points. Low interest rates naturally drive money to the stock market, though if a stock correction does come, the 2% return on safe paper will look good in hindsight. But meanwhile, though many expect a stock price correction sooner or later, no one wants to bet on “sooner” and end up being the foolish Chicken Little. > > The low yield on 10-year Treasuries has no precedent except for the 1940’s and early 50’s. That was a time of very high employment and MUCH higher GDP growth than we see today. _ **The P/E ratio of the S&P 500 is now a whopping 25.5, compared with 6.6 on Jan 1, 1949.** _ :eek: Whoever invests in the short term is gambling. Long term things should be fine until robots take over and then we have an issue. Hop on the basic income wagon. > [@HMS\_Irruncible](#): > > Yes, but not for you. Or for me. [Productivity gains are increasingly divergent from wages.](http://www.epi.org/publication/understanding-the-historic-divergence-between-productivity-and-a-typical-workers-pay-why-it-matters-and-why-its-real/) That means the workers who are supposedly producing all this extra wealth aren’t getting the gain. When policies are driving wealth out of the hands of consumers who earned it, and who need to be spending it to keep the economy moving, this is not a sustainable situation. > Not sure how this comparison is supposed to work, but in historical terms, you’d be hard pressed to find comparable situations that didn’t precede a revolution or world war. Either way, back to my earlier point, this kind of situation sits entirely outside the imagination of investment forecasters who have a vested interest in telling themselves that this house of cards can never collapse. > > Famous last words of every bubble… “IT’S DIFFERENT THIS TIME!” I don’t invest for a 5 year horizon. We are investing for the next 30+ years. A lot of ups and downs happen. I don’t care about the day to day for investing to be honest. > [@HMS\_Irruncible](#): > > Simple answer - the chaos bill is still in the mail. He’s only been president for 9 months. Things feel chaotic, but most of what we perceive as chaos is a president breaking social norms on social media. The administration hasn’t yet been tested by a serious crisis. The consequences of his true executive blunders will take a little more time to ripen - e.g. we know it will eventually hurt us to have a gutted, demoralized State Department led by emasculated Secretary of State, but we don’t know when or how large that cost is going to be, or when it will come due. > > Reasonable people could understandably believe we’ll dodge these bullets forever, or that there’s no sense in waiting for the other shoe to drop. I personally am taking the Chicken Little approach, having mostly shifted to safe-harbor investments shortly after inauguration. I know I’m getting out too early to enjoy this little rally, but hard experience tells me it’s better than waiting too late. Well, fear is costly. 30 years from now you may regret not riding the ups and downs. > [@nearwildheaven](#): > > MHO: We’re in a bubble. I am not looking forward to when it bursts. Why? When it bursts it’ll be a good time to buy more stocks. How old are people here? I’m getting the feeling that people are 70 and heavily tilted towards equities. ---
**Author:** ![Exapno\_Mapcase](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/exapno_mapcase/32/1051_2.png) [@Exapno\_Mapcase](https://boards.straightdope.com/u/Exapno_Mapcase)\ **Post date:** [October 19, 2017, 1:14am UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148/58 "2017-10-19T01:14:50Z")
> [@Tom\_Tildrum](#): > > Presumably, however, you don’t mean to obscure the fact that the Dow has risen 25% in less than a year. If not unprecedented, this is certainly extremely unusual, regardless of the absolute level. It helps to put it in perspective, as this [10 year chart indicates](http://www.macrotrends.net/1358/dow-jones-industrial-average-last-10-years). The Dow has been on a steady rise since it hit the low point in 2009. 2016 also saw a 25% rise, even during a political campaign shouting how awful the economic purportedly was. This certainly is an unusually long consistent rise. But it’s entirely due to a favorable global economic picture and the relative calm of international relations. Has a Republican president and Congress promising to lower corporate tax rates encouraged the market? Obviously so. But while corporations as a whole have been doing well, the Dow is an insanely bad indicator. As the [Washington Post](https://www.washingtonpost.com/news/business/wp/2017/08/02/dow-jones-crosses-over-22000-for-first-time/?utm_term=.29cdb6efdd71) wrote: > [@](#): > > Boeing, which generates much of its profits from its Defense, Space and Security division, has seen its shares soar more than 70 percent since Trump’s election. It has accounted for 45 percent of the Dow’s rise this year, far more than any of the other 29 companies in the index. ---
**Author:** ![HMS\_Irruncible](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hms_irruncible/32/7394_2.png) [@HMS\_Irruncible](https://boards.straightdope.com/u/HMS_Irruncible)\ **Post date:** [October 19, 2017, 1:43am UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148/59 "2017-10-19T01:43:45Z")
> [@octopus](#): > > Well, fear is costly. 30 years from now you may regret not riding the ups and downs. Nope. Been playing this game long enough to know that if you want to be solvent enough to buy the lows, you have to be OK passing up some of the highs. I’ve also learned that when people are saying that historic highs can keep right on getting higher, that’s a big fat warning flag. But, you do you, I’ll do me. ---
**Author:** ![octopus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/octopus/32/3716_2.png) [@octopus](https://boards.straightdope.com/u/octopus)\ **Post date:** [October 19, 2017, 3:21am UTC](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148/60 "2017-10-19T03:21:15Z")
> [@HMS\_Irruncible](#): > > Nope. Been playing this game long enough to know that if you want to be solvent enough to buy the lows, you have to be OK passing up some of the highs. I’ve also learned that when people are saying that historic highs can keep right on getting higher, that’s a big fat warning flag. But, you do you, I’ll do me. I just employ a simple strategy. Stick a bit in each week regardless of low or high. Then I rebalance periodically. Then I wait til retirement. In other words, I don’t consider Trump to be important with regards to the stocks. Again, look at all the real issues in history. As long as we have relative domestic tranquillity things should keep chugging along. If the US stock market goes tremendously low it means US society has basically collapsed. [Previous page](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148.md?page=2) [Next page](https://boards.straightdope.com/t/dow-at-nearly-23k-for-first-time-in-history-what-is-going-on/799148.md?page=4)