
Dow Hits 20000 for First Time - mbosch
http://blogs.wsj.com/moneybeat/2017/01/25/dow-hits-20000-for-first-time/
======
bamdadd
Listen to this episode of Planet money in 2013: Despite all the celebration,
the Dow Jones industrial average has not hit record highs recently. If you
adjust for inflation, the highs just aren't as high as they seem.

And even if it does hit a real, inflation-adjusted high in the next few weeks,
it won't mean much. The Dow is a seriously flawed stock index, and it's
certainly not a good way to measure what's going on in the overall economy.

On today's show, we rain on the Dow's parade and explain why a lot of very
smart people say we should ignore the Dow.

[http://www.npr.org/sections/money/2013/03/12/174139347/episo...](http://www.npr.org/sections/money/2013/03/12/174139347/episode-443-dont-
believe-the-hype)

The Dow Isn't Really At A Record High (And It Wouldn't Matter If It Were)
[http://www.npr.org/sections/money/2013/03/05/173515767/the-d...](http://www.npr.org/sections/money/2013/03/05/173515767/the-
dow-isnt-really-at-a-record-high-and-it-wouldnt-matter-if-it-were)

~~~
wtvanhest
Yes, the dow is a flawed index.

That said, the S&P 500 & Russell 1000 are also at all time highs.

[https://www.google.com/finance?q=INDEXSP%3A.INX&ei=6-KIWNi7K...](https://www.google.com/finance?q=INDEXSP%3A.INX&ei=6-KIWNi7KIeejAHlwZq4Cw)

[https://www.google.com/finance?q=INDEXRUSSELL%3ARUI&ei=8eKIW...](https://www.google.com/finance?q=INDEXRUSSELL%3ARUI&ei=8eKIWJnQNof7jAG74ar4Cw)

None of these data points mean anything on their own. People that look at a
chart a conclude anything at all are not doing enough analysis.

------
pilom
So what? The Dow is a terrible indicator of even how well the stock market or
the economy as a whole is doing. It is price weighted instead of market cap
weighted so smaller companies that released fewer shares at a higher price
have more impact on the Dow than larger companies.
[http://www.npr.org/sections/money/2017/01/04/508261371/episo...](http://www.npr.org/sections/money/2017/01/04/508261371/episode-443-dont-
believe-the-hype)

~~~
stonemetal
Alright how about NASDAQ and S&P 500 hit record highs at the same time.

~~~
slaveofallah93
That would be a much better headline.

~~~
kchoudhu
Even better: RUA 3000 hits all time high. A broad spectrum index covering ALL
publicly traded companies in the US.

------
xigency
I understand that people believe Trump is good for business. And I also
understand that people believe Trump is good for the rich. And I also
understand that people believe Trump is good for the blue-collar worker.

But I don't understand how Trump could be a good influence, in the long term,
on business and the stock market, when looking at his positions and policy
changes.

Why Trump isn't good for poor working class America - Assuming there's a large
tax on every good coming into the country, then the cost of groceries will
increase dramatically. The cost of cars will increase. The cost of consumer
electronics will increase. The cost of many goods that Americans buy will
increase and that will most directly affect the poor.

Why Trump isn't good for business - Many American companies source their parts
from other countries. Increased tariffs and taxes impact their bottom line.
Trump wants American companies to hire American and is willing to enforce it.
American workers have a higher minimum wage. This also affects the bottom
line.

Why Trump isn't good for the rich - If businesses are impacted then
investments should decline, but if you've seen The Big Short, then it's
possible that we could just have a fraudulent, unpredictable market instead.
The huge tax cut should also benefit the rich, so actually, Trump does seem
great for the rich.

All in all, I'd like to hear what others think and why this sort of thought
isn't widely circulated.

~~~
jcfrei
I have this - admittedly very condescending - theory that a large part of the
middle class is still "financially illiterate". Wages are hardly ever
discounted for inflation and thus growing wages (in absolute terms) make most
people happy. Even if their purchasing power is declining. As long as there is
no sharp increase in prices most people won't complain.

~~~
Terr_
I wonder what things would be like if employers were somehow required to
adjust pay for inflation _by default_. I guess they'd just label it a "raise"
and take credit.

Heck, I'd be happy if Congress would pass legislation to make the minimum-wage
automatically adjusted too.

~~~
billions
How about the government stops printing money instead? It would have a similar
effect on buying power as your suggestion.

~~~
Terr_
That's a little reductive -- there's always going to be _some_ inflation (or
deflation) over time, because there's no instant accurate measure of "how much
value exists."

So making mistakes in inevitable, and it's safer to err towards inflation than
deflation.

------
nugget
Remember when nearly the entire business media predicted that if Trump was
elected the stock market would crash immediately?

Some of my smartest friends (at hedge funds) placed large bets mid to late
2016 that the market would decline. Now here we are.

The lesson isn't that Trump is awesome for the economy (maybe he is, maybe he
isn't) or that the market won't crash tomorrow (maybe it will, maybe it won't)
but rather that even the so-called experts are relatively clueless when it
comes to financial timing. Remember Brexit? Same story. Good lessons for the
rest of us trying to invest. If you want to learn more, read 'The Bogleheads
Guide to Investing' [[http://fave.co/2jpTKmf](http://fave.co/2jpTKmf)] which
is an excellent place to start.

~~~
tgb
I'm just a little confused about this though. If everyone thinks the market
will decline due to Trump, then doesn't the market actually decline? What I'm
saying is that apparently there were even more people making the opposite
guess.

~~~
elastic_church
It is so so so much more nuanced than that.

In one way, the more people that bought put protection on their stock
portfolio created the bullish pressure that took weeks to unwind.

(When you buy puts, the market maker is going long the stock as their own
hedge. most akin to a bookie)

~~~
tinytim69
If you buy puts, MM sold puts and will sell shares against since he is holding
a deltaLong position from selling his puts (he makes money if the underlying
goes up and lose money if the underlying goes down (which is why you bought
the put). To hedge that risk he would sell shares against the sold put so that
the risk of the underlying move would be covered.

~~~
elastic_church
you're right, but yes the concept I'm referring to was staying delta neutral.
When people close their put options before expiration, the MM's create buying
pressure.

------
muizelaar
"The Dow is dumb! Calculating a price-weighted average of a small arbitrary
group of stocks is no way to go through life, son, and no one should care if
that average reaches 20,000." \- Matt Levine from
[https://www.bloomberg.com/view/articles/2017-01-11/insider-t...](https://www.bloomberg.com/view/articles/2017-01-11/insider-
trading-and-theoretical-indexes)

~~~
choward
Exactly. This is the most pointless economic indicator ever.

------
nrjdhsbsid
Trump for all his craziness is vehemently pro business. I know the whole tech
crowd wants him to crash and burn but the stock market rising is no surprise
to me.

Whether it's worth the damage done to the poor and the environment is yet to
be seen.

~~~
cryptoz
> Trump for all his craziness is vehemently pro business.

No he is definitely not. Trump is anti-business and he makes that very clear.
His campaign promises and actions since election are super clear that he is
pro-his-wealth and _not pro-business._

A pro-business politician would raise taxes on the wealthy, provide tax cuts
for the middle class, increase the corporate tax rate, improve immigration so
that more people could come in to the country, address massive business risks
like climate change with a serious face, improve healthcare for everyone in
nation, etc. A pro-business politician would want a healthy and wealthy middle
class, a stable climate, and good tax structure to incentivize smart people to
come here and build useful things. More businesses are more likely to succeed
in a society that is healthy, resourceful with its environment, and with
enough wealth shared that income inequality does not destabilize the
structure.

Trump is the opposite of being pro-business. Trump is not fiscally
conservative or pro-business at all - the very idea that he is would be
considered an "alternative fact" \- a lie.

~~~
ovidnis
Could you explain why any of what you say a 'pro-business' politician should
do is pro-business? I think a lot of people would disagree with you on those
points.

~~~
cryptoz
Okay, sure. The first place is to immediately dispel the idea that Republicans
have ever been about being "pro-business" \- and the second place will be that
Trump specifically is not.

It's simple Tragedy of the Commons at first. Republicans / Republican
Presidents are generally pro-greed and pro-riches, not pro-business, and those
are different things. What you want in a good business environment is not
achieved with Republican policies. This can be seen with the past few
presidents - good economic times and growth with Democrat policies, and poor
economic times and decline with Republicans.

Specifics.

> A pro-business politician would raise taxes on the wealthy, provide tax cuts
> for the middle class, increase the corporate tax rate

Henry Ford is the good example here of showing why this is pro-business. Give
your country a stable, wealthy middle class (pay your auto-workers more, a lot
more), and then they will be able to buy your products and your company will
thrive. Roads will be built for your cars to drive on, with those taxes!

Wealthy people are important in a capitalistic society, but income inequality
and extreme wealth present dangers, not useful things. Income inequality will
catch up with the business as the middle class fades and doesn't buy their
products.

Want a pro-business environment? Increase corporate taxes to fund schools and
education and infrastructure so that more people will grow up healthy and
wealthy and wanting to buy things.

> Improve immigration so that more people could come in to the country

Is this really a debate, especially here? Most of the smart people in the
world who can create wealth and businesses do NOT live in the USA. If they
wanted to live here, or did live here, that would be great.

> Address massive business risks like climate change with a serious face

The climate is changing, and it's going to kill a lot of people that could
have been buying your products. It's going to displace hundreds of millions of
families and settlements. Food production and distribution is going to be
wildly affected. Basic things that should be stable in a business environment
will not be stable. Climate change is the biggest RISK for corporate profits
in the world (though right now you could also see it as an opportunity - if
you recognize that it needs to be addressed).

> improve healthcare for everyone in nation

Again is this really a debate? Isn't it obvious that healthy people will be
better for business? Do you want your customer base to be dying? Or your
employees worried about disease? That's not useful for business.

------
cschneid
Other people have covered how the Dow is a mediocre stock index. The other
half is that 20k doesn't mean anything either. It's just a number calculated
by the math-function of the index.

The psychology is mildly fun, just like a 50th birthday may be more celebrated
than a 49th. Round numbers appeal to us. But 20k dow says nothing more about
the state of the economy than the 19.9 dow did a few days ago.

~~~
coldtea
> _But 20k dow says nothing more about the state of the economy than the 19.9
> dow did a few days ago._

It's not the 20k vs 19.9 it's a) the record high, b) the upward trend.

~~~
benjanik
But we won't be celebrating 20.1k in the same way.

~~~
coldtea
Which makes sense, because even if a value is continuous and its rise
monotonic, you obviously can't celebrate all the time.

Having some milestones to pause and ponder along the way makes sense.

------
SlipperySlope
Would be great for Republicans if this boom persists through the 2018 midterm
elections.

When Trump's trade policies take hold there should be a rush to form
manufacturing startups to make stuff in the USA for the industrial supply
chain, e.g. power cords, circuit boards, paints, etc. I expect these to form
in the traditional centers of manufacturing excellence - urban areas where
minorities will enjoy relative job prospect improvements.

~~~
celticninja
Can the US really make power cords cheaper than China or Vietnam? If they add
tariffs to imports I'm sure they can but is manufacturing for the domestic
market alone enough to create sustainable jobs?

~~~
ChrisClark
Nope, unless it's all automated and paired with high tariffs. But then you
might only create tens of jobs per factory instead of thousands.

------
jchendy
Here's an interesting podcast claiming the Dow is meaningless:
[http://www.npr.org/sections/money/2017/01/04/508261371/episo...](http://www.npr.org/sections/money/2017/01/04/508261371/episode-443-dont-
believe-the-hype)

The article might have already discussed this, but I can't tell because of the
paywall.

------
dmode
Just a reminder that Dow Jones went up by over 140% over the last 8 years.

~~~
ggiaco
Right. It was basically already at 20k (19,963.8) on Jan 6, with two weeks
left for Obama's Presidency.

~~~
dahdum
That's correct, but the bull run started after the election results in
November.

I'm not exactly shocked that an ego-driven, heavily pro-business Republican
President with full congressional control and majority of states under
Republican governorship could drive the market up.

------
nabla9
So nominal stocks valuations are up. The real question is are valuations high
or low.

good indicators

\- Stock Market Capitalization to GDP (This is Warren Buffets's favorite).
[https://fred.stlouisfed.org/series/DDDM01USA156NWDB](https://fred.stlouisfed.org/series/DDDM01USA156NWDB)?

\- Q Ratio aka Tobin's Q Ratio (total price of the market divided by its
replacement cost)

\- S&P 500 CAPE (PE10) and Shiller PE (PE)

\- S&P 500 Price to Book Value

None of them alone, but all of them together.

------
myf01d
Daily reminder that stock indexes in free markets have very little to do with
the government.

~~~
niij
Do you have any evidence of that? From my understanding the two are hand in
hand. (note: I am not an investor)

------
thebiglebrewski
If you had a bunch of money to put in the stock market, would you:

\- Put 1/3 of it in now and the other 2/3 in when the next crash hits \- Wait
until it all goes to shit and put it all in then, keeping it in a high-yield
savings account until then (they make about as much as CDs these days)

Would love to hear opinions!

~~~
maaaats
Time in the market is better than trying to time the market.

How long until next crash? When is the crash over and things start to climb
again? You cannot know before after the fact, so it ends up being a big
gamble. I'd say invest now, possibly over a few months if you want to spread
the risk.

------
jpttsn
The Dow is a bad index, but if it's the warmest year ever, we shouldn't focus
on all that's wrong with the Fahrenheit scale.

~~~
lytol
The Dow is more similar to using a barometer and proclaiming it the warmest
year ever. However, in this case, the thermometer just happens to agree.

------
dibujante
There's no real evidence that the President has much of an influence on the
economy.

~~~
bdcravens
I agree 100%, but for as long as I can remember, presidents have received
credit for the state of affairs on their watch, and used that as talking
points while campaigning.

~~~
dibujante
Yeah :( It started with Kennedy, if I recall correctly, but it apparently took
off and became a standard part of the presidential playbook.

------
mccoyspace
The Venezuela stock market has had quite a run over the past few years too,
but.....
[https://www.bloomberg.com/quote/IBVC:IND](https://www.bloomberg.com/quote/IBVC:IND)

------
thegayngler
This is nothing more than a sugar high before the inevitable Trump crash. He
likes to take credit or stuff other people did. Then when Trump actually does
something and it doesn't go well he pushes the blame onto someone else.

The stock market indexes were already up significantly as a result of Obama's
policies. I'm just not here for Trump or others assigning credit to Trump for
something Trump had very little to do with.

This is what you call speculation. Under Obama people had to prove out their
finances. Under Trump gut feeling is enough.

~~~
thegayngler
I got down voted for this. However, I was right that it was a sugar high and
not based on the numbers. It was some blanket assumption that Trump would
automatically be "good for the market" because "deregulation". Deregulation
isn't always good.

"Customers" will be a lot less likely to spend money if they aren't adequately
protected when they do. Regulations also exist to protect the health and
safety of the US citizens. It protects business from getting sued when they
didn't follow the regulations.

So businesses and consumers benefit from regulation and that there is no gain
to be had here. We are just trading the small gains in stock price for lots of
additional risk legally and otherwise.

I didn't even bring up the fact that Trump may unwittingly get us into a trade
wars with some of our biggest trading partners by threatening to go to war
with them or threatening them with tariffs when they don't do what we say.

------
guntars
Can we not post articles behind a paywall?

------
ilamont
What will happen to the Dow (and other indices) when the first serious
geopolitical or financial crisis hits?

~~~
codingdave
It will go down. After that, it will go up again. Then down again. Then up
again. Ad nauseum. The market fluctuates. If you want to put money away for
the long-term, it makes sense to have some in it. For the short-term, not so
much. This is all pretty standard stuff.

------
notpc
This is driven by expectations of Trump's deregulatory agenda. He says he's
going to cut 75% of regulations.

I can't believe this is happening. America is back people.

~~~
celticninja
Depends which 75% of regulations he cuts. If he cuts EPA regulations and there
is more pollution as a result of the increase in manufacturing this could
result in more deaths in the long run. How about safety regulations get cut so
manufacturing gets cheaper but more workers die in manufacturing plants, is
that ok?

~~~
jjawssd
Fine, but what if there is a chance that the huge heap of regulations
supporting entrenched interests is broken up? I'm looking at you Comcast

~~~
harryjo
Let's see which regulations get cut first. So far, it's not the government
contracting regulations.

Bonus: when Trump "freezes the size of Federal employment" do you think that
will be match by a freeze in contracting, or a boost in crony contracts?

~~~
jjawssd
What I learned reading The Art of The Deal is his MO:

Trump: "I have a problem (e.g. Wollman Ice Rink) but know nothing about this
topic. Who is the best company that makes ice rinks?"

Makes a few calls to hockey teams to find this information.

Learns the name of the company.

Calls CEO of the ice rink company.

After 15 mins of conversation, learns that freon-based ice rinks suck the
monkey and that brine-based ones last forever.

Total elapsed time: Probably an hour.

Hires ice-rink company to help with Wollman Rink.

Project completed in four months and under budget.

No studies, no meetings, just results.

Government bureaucrats: REEEEEEEEEE!

~~~
notpc
These critics don't understand what it means to get things done. It's becoming
a meme at this point.

Media for the last year and a half: "Donald Trump will NOT be able to build
the wall."

Just now, Donald Trump: "We will start IMMEDIATE CONSTRUCTION of a border
wall."

------
plowman
This is why Hacker News needs a downvote button. This is a non-story. The DJIA
is an average of 30 stocks. Even if it was possible to figure out causation of
stock market movement, the DJIA would be a terrible indicator of stock market
movement.

For more, see here:
[https://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average](https://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average)

