A reporter from SmartMoney contacted me a couple of weeks ago to ask me to participate in a little game they were hosting. “All you have to do is guess when the Dow will hit 10,000,” she said. “This is just for fun.”
“I’ll do it,” I replied, “but I want to make it clear that this is just a guess. Nobody really knows.” I told her the Dow Jones Industrial Average would reach 10,000 again on October 15th at 10:22am Eastern. I was wrong — but not by much. It actually reached 10,000 at 1:21pm Eastern on October 14th.
I know this because I’ve been sitting here for the past ten minutes refreshing my browser page, waiting for it to happen. And it just did:
The Dow has hit 10,000! We’re saved! The recession is over!
Well, not really. But sometimes it seems like that’s how the media reports things. I find it hilarious that of the three dozen “investing pros” Smart Money polled, my seat-of-the-pants guess was second closest. (Who won the pool? Financial-planning guru Sheryl Garrett, who guessed 10:00am Eastern on October 14th.) Nobody knows what the stock market will do, and the guess of a humble financial blogger is just as good as that of an investing professional.
My brain hurts
While goofing around, waiting for the index to cross that arbitrary but magical line, I read articles linked from Google Finance. One was this piece from MarketWatch about how traders who favor “technical analysis” don’t care so much about Dow 10,000, but are more interested in when the S&P 500 index will cross 1121, which means it will have regained half of what it lost in the bear market. They believe that when the S&P reaches this point, it’ll have momentum to continue to climb.
The interesting part of the article, though, came in the middle. In the “befuddling rally” section, a “chief investment strategist” says that the market’s continued increase is frustrating to those who are waiting for a “sizable price decline” before re-investing.
Do price declines in the market get any more “sizable” than the one we experienced from September 2008 to March 2009? What were these people doing with their money then?
Are there really people who are waiting to invest in stocks because they want the market to fall 5% or 10%? That seems crazy! By waiting, they continue to miss out on market growth. Have they been waiting since June? Since March? Will they finally put their money back into stocks at the start of the next bear market? And will they then pull the money out again when the market hits bottom?
In another MarketWatch article, a second “chief market strategist” is quoted as saying that the Dow breaking 10,000 could bring back a “whole portion of the population that walked away from Wall Street in the last couple of years because of everything that has happened”.
I don’t even know what to say. This sort of stuff drives me nuts. I guess it’s another reminder that it pays to ignore financial news. I’ll just keep investing my money at regular intervals, thank you very much. All of this guesswork and market timing seems like a bunch of nonsense.
Folks, stick to your investment plan. Don’t try to time the market. Keep your goal in mind, make contributions to your retirement when you can, diversify, and don’t let the financial media mess with your head. They don’t know any more than you do.
Footnote: The Dow closed above 10,000 today for the first time in more than a year. CNN Money writes: “While 10,000 is not a significant milestone on a technical basis, it’s meaningful on a psychological level, analysts say. It could either usher in more buyers or give investors who think the rally has been too much, too soon a reason to retreat.” I love that. It basically says: Well, maybe more people will invest now, or maybe they won’t. Really? You think? See also: Our recent discussion of Mr. Market’s wild ride.
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