Thursday, September 30, 2010

Week 154 of the 2007-2010 Bear Market

By Mark J. Lundeen:

We should always keep in mind that the DJIA is only 30 blue chip companies, so it's not the stock market. But the Dow has told the market's story very well for 125 years.

The "Experts" are making much of the nice rise in the DJIA this week. But I don't see anything to get excited about. For one thing, the Dow has been stuck between its BEV -20% & -30% lines for almost 11 months now. That is a long time for the DJIA to be stuck in a 10% trading range. This is especially so when we consider this is an election year, a time when politicians want happy voters. Nothing makes voters happier than a rising DJIA!

Since 1993, dividend yields have been below 3%, except during the 2008-09 crash when yields spiked up to 4.74%. But who was buying stocks in March 2009? People with more guts than me! The point of the small dividend since 1993 is that people have been buying stocks for capital gains, not income. But since last November, there haven't been any capital gains. Puts on indexes have been losers too. Look at the chart below. With capital gains in the stock market so hard to find, no wonder trading volume is so in full

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