Has the stock market hit bottom yet?

In My Humble Opinion
21

Well here’s a question. Why from 1970 until about 1995, the DJIA more or less increased at about the same rate as the GDP but then from 1995 to 2000 it surged up 3 fold? Does it make sense that the stock market would increase that much faster than the actual the economy?

The answer, of course, is the dot-com boom. It wasn’t just dot coms though. The combination tech stocks quickly rising in value and the sudden availability of online trading basically caused all stocks to to bid higher. There was a partial correction in 2002, but then they shot up again.

Assuming that the DJIA increased at the same rate as the rest of the economy from 1995-2008 (about 3% on average), I would predict (using my crude calculations) that the fair market value of the DJIA would be in the high 6000s.

Of course, irrational pessimism may push it much lower than that, but I say 6000s is the bottom.

22

The answer is that nobody knows. The better question is how that answer affects your investment decisions. Personally, as a 31-year-old, I’m still buying stocks (but may allocate more to non-US).

23

If that’s a better question then you should start a new thread about it.

24

Well, it was and it wasn’t. Then the Obama transition team had to go kill it for me by announcing the proposed new Treasury Secretary during the last hour of the market and sending it up 494 points.

But I was correct about Citigroup. And I still believe we haven’t hit bottom yet.

25

People like Warren Buffet are cautiously buying bargain stocks, but even he is strongly advising people not to do likewise unless they can sustain a loss. His stated odds are two to one for continued decline in the markets.