Media Appearance: Kudlow & Company (10/03/06)


Back in the studio for the regular appearance with Kudlow tonite, at 5:00 – 5:25pm.

The topics will be Dow Rally, The Economy, Sentiment, and Earnings. Guests include the erudite Stephan Abrahms (Trust Company of the West), the insaneley bullish J.J. Burns (of the eponymously named firm), and my latest contrary indicator, Joe Battapaglia (Ryan Beck & Company).

A few random thoughts about this market:

• The Narrowness of the rally continues:

ice All time high Date of high Recent high % off all time high
Dow 11,750.28 (1/31/00) 11647.69 0.25%
Tran 5,013.67 (5/31/06) 4433.34 11.57%
SPX 1,552.87 (3/31/00) 1333.7 14.11%
Nasdaq 5,132.52 (3/31/00) 2258.3 56.00%
NDX 100 4,816.35 (3/31/00) 1656.07 65.62%
Russell 784.62 5/31/2006 729.94 6.97%

The Dow has only 10
above their January 2000 highs, and of those 10, four are responsible
for dragging the index higher – Boeing, United Technology, Altria and Caterpillar.

• Despite the recent move towards big cap and tech, be aware of the pundits who have been advising you of this for the past 5 years have
been very, very wrong. (We made the suggestion to shift to big caps over the summer).  The Nasdaq 100,
for example, is still down an eye-popping 65% from its 2000 highs.

• The 3 bullet points above are why most investors are not
feeling like they are at 6 year highs; Unless they hold only Dow stocks – or the
4 mentioned above – most investors portfolios remain far below their 2000 peaks.

• Cash has outperformed the Dow since January 2000; Even
considering reinvested dividends; cash STILL out performs the Dow.

• The Dow’s Real (inflation adjusted) performance, even with dividends reinvested, is significantly below breakeven.

• Lastly, see this for Why the 1994 Goldilocks scenario is so unlikely.

Should be a gas . . .

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What's been said:

Discussions found on the web:
  1. Bob A commented on Oct 3

    The headline according to
    AP : “Dow soars to new closing high of 11,727 ”
    Bob: “Six years later you’re finally back to break even… except… well you’re really only half way back to break even because of inflation. Woohoo”
    Yes, call me cynic.

  2. James C. commented on Oct 3

    “Cash has outperformed the Dow since January 2000; Even considering reinvested dividends; cash STILL out performs the Dow.”

    And why make the comparison to January of 2000 rather than, say, to January of 1998 before the market set out on its bubble climb? Comparison to the top of the market in 2000 is the worse place to choose as a point of comparison and, more important, what’s the relevance?

    Anyone who stayed out of the current climb for the last year anticipating a market crash this fall has probably underperformed I would imagine.

  3. jj commented on Oct 3

    Joe Bats agreeing with you

    a worry sign if there ever was one

  4. Cherry commented on Oct 3

    My father disagrees with me and thinks November is the big selloff. Post-election and recession may be about to begin that month, will have a swarm of bad news rocking the already bad fundamentals that exist. Continues with the ghost of 73.

    I think it comes this month. Family bet.

  5. M.Z. Forrest commented on Oct 3

    And why make the comparison to January of 2000 rather than, say, to January of 1998 before the market set out on its bubble climb?

    Comparing to a prior low just gives you growth potential (1998 admittedly wasn’t a low.) Comparing to a prior high gives you an idea of the inherent risk. 6 years to recover principle is not a short period. For the markets are always up in the long run folks, it puts long in perspective. Comparing it to a random data point in the past just gives you a data point.

    If the Dow underperformed 13-week treasuries over a 12 year span, that would be valuable to know as an investor.

  6. njmvespa commented on Oct 3


    Methinks your contarian indicator (JB) says we are going higher. What say you?

  7. Mark commented on Oct 3


    Peak to peak is the ONLY valid comparison. The rest is cherrypicking the data.

  8. V L commented on Oct 3

    Joe B. was reasonable and it was harder not to agree with him.
    I do not know what to make out of it. I did not expect Joe B. to take on such positions and agree with Barry.
    I will probably double tomorrow and short more of industrial metals bubble stocks (shorting them last Friday has been very profitable so far)

  9. blam commented on Oct 3

    The reason stocks have gone nowhere is that they have been overvalued and are now seriously overvalued.

    They bounced off the recession low overvalued but gained traction because the discount rate was rediculously low. Now the short term risk free Fed money, although neutral in normal times, is more than a match for puffed-upped stocks at 19 X (generously) peak earnings on the cusp of the corporate platform structure payback.

    IMO, it is a good time for retirees to withdraw.

  10. Eddy commented on Oct 4

    I see yahoo chart the Dow’s ALL TIME HIGH is around 11908 on Jan 14 2000. But why all analyst mentioned that the all time high is 11750? Am I missing something?

  11. minmex commented on Oct 4

    Probably close versus intra-day Eddy.

  12. kennycan commented on Oct 4

    Even cherrypicking does not make the case – on Dec 31 1997 Dow closed @ 7908.25. So it is up 48.3% over an 8.5 years. I believe that is just above a 4% return. With dividends I can see you getting to 6.5 – 7%. And that is from nearly a trough to peak.

    And only if you held the 30 DOW stocks though thick and thin – through the 2000 point declines in late 1998, 2001 and mid 2002 and a 1500 point decline in March/April 2000. And Sep 11.

    Think many people had the guts to ride out those periods with 30 stocks and all for a sub par 7% return in the end?

    Cause you ain’t making the case with the NASD.

  13. jkw commented on Oct 4

    I think bottom to bottom comparisons could also make sense and be fair. But bottom to peak comparisons or peak to bottom comparisons certainly aren’t. And we are not at a bottom. We will know we have passed a peak when the market falls and stays down for more than a few months.

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