Dow Jones 5000? Not this year

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Read another story about DJIA hitting 5,000 in 2-2.5 years. I suppose it’s possible. But I don’t think it will be a real bottom, more of a “hit 5k and run up like a rocket”.

Generally I think it’ll be like that due to extremely short memory and ultra-high greed levels. People go get caught in Nigerian scams and trust shady companies that advertise by saying repeatedly that you can earn thousands a day and quit your day job will, undoubtedly, lift the indexes again, as soon as they hit that low mark.

Mostly because out of the whole market crash of late they remember only one part — DJIA went up like a rocket, going from less than 7,000 to 10,000 in about a year and a half. So, as the market will be going back to touch that low, there will be more and more “analysts” saying that there it is, twice-in-a-lifetime chance to ride the market back up to Dow 10,000, to infinity and beyond!

And people will do it. Whatever money they will have left, they will dump them back into the market. And as soon as there’s any noticeable bump, the prophecy will have fulfilled itself, as more and more people will rush, trying to catch the market rise again.

That pattern can repeat a couple more times, until monetary reserves and lines of credit of people who love greed will be completely exhausted. At which point Dow will probably settle around 7,300 and will continue to trade in a small range from, say, 7,000 to about 8,000. Gold will be around $2,730, but inflation of other prices will be quite disproportionate. Certain food commodities will go up way more than gold, but, obviously, are impractical for an individual investor to use to protect assets.

For the remainder of this year, the only question is, will the Dow go below 9,300. If it goes there, then the next stop will be 8,500, but I doubt we will go below 8000 this year (well, short of huge panic, and administration doing something extremely fiscally irresponsible in the name of “economic stimulus”, which I hope they won’t).

Of course, there’s another scenario. Where Dow will be 12,000. But not so much because the stock prices are so wonderful, but rather because the inflation train will have reached the start of the tunnel, where investors were standing, watching the pretty lights. Throwing components out of DJIA is also possible, but you have to replace companies that went kablooey with something else, and “quality” investment these days is hard. Mostly because the idea of investing is just a substitute for gambling, and not an attempt to help and support a viable business that does something right/well.

Oh well. We’ll see what’ll happen.

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