# Dow 1000 or 40,000



## dogcom (May 23, 2009)

Do you think Dow 1000 or 40,000 is possible in the next decade and can you think of reasons for how this might come about. On another forum when oil was close to 100 dollars I put up a topic on another forum when oil was near $100 saying, "Oil $70 or $150". Well of course the crazy thing was we saw close to $150 and much less then $70 all in the same year, so anything is possible. 

I hear some people mention Dow 1000 is possible, for a bottom, in this secular bear market, because that is where the credit expansion to start the last big bull market started in 1982. They point to the Japanese market, the Dow in the 30's, the tulip mania and so on as examples and they all fell over 90 percent except Japan which we still are not sure where it will end up. 

I put in 40,000 as a crazy high for the up side. I suppose if we get the high to hyper-inflation people like to mention then this could be possible. 

I think we are still in a secular bear market and will be heading down below the March lows after this small bull or bear market rally is over. The 1000 number though is hard to imagine because I would think we have gone forward enough since 1982 for this to happen. I would picture 3000 to 4000 deep low if it got bad enough due to government debts and so on.

On 40,000, I think if the Fed was able to unload money onto the American public in force then we may see the necessary inflation to propel the market to that sort of high.


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## HaroldCrump (Jun 10, 2009)

I don't think we'll see DJIA at 1,000 pts during next decade.

40,000 is unlikely as well, however, DJIA can soar above 25,000 in the event of a recovery from a global scale war.
I don't know who the opponent will be in the war and who the allies may be.
Russia is one potential opponent and China is another.
I don't think any other country could challenge US military might during the next decade.
Anyhow, after the war is over, there will be a recovery and re-construction exercise.
As part of post-war re-construction, DJIA could reach un-thought-of heights.
25,000 is possible, 40,000 is possible but unlikely.
Of course, if the composition of the DJIA changes significantly during the next decade then the index value can not be predicted.
It could go down to 1,000 in that case.


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## dogcom (May 23, 2009)

Here is where I saw an article that tries to explain why 1000 may be possible. http://www.howestreet.com/articles_as_pdf/2010Jan052328Dow 1000.pdf 

Haroldcrump I still think 40,000 might be more likely if hyper-inflation was to take hold. Of course it would mean nothing because of the loss of purchasing power.

The war angle is one threat that we need to watch for however. There are a lot of recourses in the world like energy and water that could become worth fighting over as this decade unfolds.


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## osc (Oct 17, 2009)

40000 on upside is equivalent to 2500 on the downside, not to 1000. 
The most likely value at the end of the decade is 25000 (at 10% rate). However we are coming after a shitty decade and probably we will get a 12-15% average rate. At 15% we go to 40000. I think that we will get to 40000 with a probability of about 30%.
The probability of hitting 2500 is less than 1%. It could happen only if the empire will totally crash into anarchy, highly unlikely despite some signs similar to those at the end of USSR (like an over-sized military bankrupting the country).


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## osc (Oct 17, 2009)

HaroldCrump said:


> I don't think any other country could challenge US military might during the next decade.


Is this a joke? US can't end a war against a few thousand talibans in Afghanistan (and I'm not talking about winning). 
Stock market sucked last decade mainly due to the idiot wars. We are not in the 40s any longer. Wars bad, peace good for economy/stock market.


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## CanadianCapitalist (Mar 31, 2009)

osc said:


> Stock market sucked last decade mainly due to the idiot wars.


You mean starting valuation had nothing to do with why S&P returns in the 2000s sucked. The S&P 500 started off the decade with a P/E of more than 40. It is around 20 now. This change is valuation in the main culprit why 10 year returns are so poor.


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## Dr_V (Oct 27, 2009)

dogcom said:


> Do you think Dow 1000 or 40,000 is possible in the next decade


I dunno, I guess we can work out some scenarios by making assumptions about effective annual growth rates, given that the current value of Dow = 10573.68.

FV = PV * ( 1 + i ) ^ n


```
Growth Rate (%) Dow Value
-14             2339.97
-10             3686.81
-6              5695.14
-2              8639.47
2               12889.26
6               18935.85
10              27425.4
14              39198.97
```
I guess that I fall into the camp of around 6% compound annual growth rate, so if I had to make a prediction, I'd suggest that it'll be around 18k to 20k.

K.


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## Robillard (Apr 11, 2009)

The DJIA at 40,000 sounds ridiculous when the average is at 10,000, but when and if it reaches 20,000, 40,000 won't sound so far-fetched. Bear in mind that if you chop off the last zero, you realise that people had the exact same discussion was held when the average reached 1,000 and people thought that that reaching 4,000 was far-fetched.


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## osc (Oct 17, 2009)

CanadianCapitalist said:


> You mean starting valuation had nothing to do with why S&P returns in the 2000s sucked. The S&P 500 started off the decade with a P/E of more than 40. It is around 20 now. This change is valuation in the main culprit why 10 year returns are so poor.


P/E of 40 was based on traders expectations of future growth. If economy would have grown as in the previous decade, P/E would have declined (or stayed the same) and DJIA would be 25000 instead of 10000.


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## Sampson (Apr 3, 2009)

osc said:


> P/E of 40 was based on traders expectations of future growth.


But that's the basis of the P/E. Not past earnings, but expectations of future earnings.


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## mogul777 (Jun 2, 2009)

I agree with Dr V, a man of reason. Obviously the starting point and timing of the market cycles will impact decade performance numbers.


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## Rickson9 (Apr 9, 2009)

In my opinion, markets are fairly valued. 

Although investing in a market index is preferable to investing in a mutual fund, if an individual buys at the wrong time, then they still go nowhere. A good example is the 'lost decade' where investors in index funds have made nothing over the last 10 years.

I don't invest in a market. In a bull market, I find almost nothing to buy (perhaps buying one stock over the course of a year). In a bear market, I have more ideas than I have money so my cash holdings (allocated to stock) quickly go down to 0%. That is the extent of my interest in the performance of a market.

Despite the stock market's 0% return over the last decade my portfolio has more than quadrupled in the same time and convinces me that targeted purchases of individual stock is best for me.

Where does the market go from here? No idea. Either outcome is plausible. If it flatlines I'll probably still make money, if it goes to 40K I'll probably a crap ton of money, and if it goes to 1K I'll be turning over my sofa cushions to find more money to throw into stocks. It's all the same to me.


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## dogcom (May 23, 2009)

I think the returns in the stock market will come more in the last half of the decade rather then the first half. I think the market is over valued right now and we will need to see PE's below 10 to end this secular bear market in the US. Right now I believe you can make money as the side line money pumps in, but only for that reason.


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## ssimps (Dec 8, 2009)

Rickson9 said:


> Despite the stock market's 0% return over the last decade my portfolio has more than quadrupled in the same time and convinces me that targeted purchases of individual stock is best for me.


As another member has pointed out, it is probably important to know how much of your portfolio increase is because of you putting more new $ into it; vs from stock price increases and yields. I did not pay much attention to this until the last year or so (yes, slap me).

For example, my portfolio has gone up 20x or more in the last 10 years, but I would estimate 95%+ is because of new money I have been able to save.


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## dogcom (May 23, 2009)

Here is a chart I found suggesting if the Dow followed the 1921-1932 time frame it would end up just under 500. If this is the case then who ever buys at 1000 would be suckers.http://www.moneytalks.net/images/stories/November23/Dec_8/Dec13/Jan_0410/Jan2010/LW01134.png


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## osc (Oct 17, 2009)

dogcom said:


> Here is a chart I found suggesting if the Dow followed the 1921-1932 time frame it would end up just under 500. If this is the case then who ever buys at 1000 would be suckers.http://www.moneytalks.net/images/stories/November23/Dec_8/Dec13/Jan_0410/Jan2010/LW01134.png


Not really. Dow dropped from a maximum of 380 to a minimum of 42, which would be equivalent to a drop from 14500 to 1600. 
However that cannot happen today in a developed country with a minimum of regulation as we have now. I am thankful for the wonderful drop we had to 6600 which was amazing. So many opportunities. I don't think we'll ever see something like that. I think the chances to get another significant drop (30-40%) before DJIA will get to at least 18000 are slim. And it will take a while to get there, maybe 5 years.


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## dogcom (May 23, 2009)

I feel sorry for you osc if you bought in at 1600. I thought it was bad when I bought at 1000. And by the way if we have a conversation like this in the future I am sure we will both be in trouble.


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## el oro (Jun 16, 2009)

osc said:


> Not really. Dow dropped from a maximum of 380 to a minimum of 42, which would be equivalent to a drop from 14500 to 1600.
> However that cannot happen today in a developed country with a minimum of regulation as we have now.


I wasn't alive at the time but I believe it was a "developed country with a minimum of regulation" back then.

I won't comment on DOW 1k vs. 40k but I will say that I believe that the Dow will be significantly outperformed by other asset classes/indices in years ahead.


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## canadianbanks (Jun 5, 2009)

I think we'll see DOW down in the 3000 to 4000 range, before this crisis is over, and this will coincide with much higher interest rates. As for the timeframe I have no clue.


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## montyloree (Jan 16, 2010)

visionvictory on youtube.com was declaring that we'll have a 2000 level.

Even though it seems like the market is improving... individuals, corporations and governments are still highly leveraged. I heard today that we're going to see a housing crash in 2010 that's even worse that 2009...

People haven't paid down the credit cards much, and their debt is still at record levels.

How does this affect the stock market? In the last 20 years the stock market has been fuelled by debt. Debt at the three levels I just mentioned. 

If governments, individuals, and corporations can't take on more debt, and actually start to pay down debt, that will deleverage the stock market.

Paying down debt will take money out of the economy, which means that companies will make less money, and thus less profits.

I'm seeing a lower stock market value in the next few years... for the logic above

Vision Victory...http://www.youtube.com/user/visionvictory?blend=1&ob=4

This guys worth a listen to... he seems like a crank at first, but he's done his homework.


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## dogcom (May 23, 2009)

Had a listen to some of his stuff montyloree and I agree and disagree with some of his stuff. He saw inflation and then high inflation in 2009 and 2010 and I for one did not see that and posted it on a different forum because I came to this one in April 2009. He also didn't see any rally in the stock market in 2009 and was wrong there. He did mention that there is 600 billion in the stock market that is not accounted for and assumes the Fed or the Treasury were involved.

I do believe there is a lot of manipulation going on and that is why I absolutely trust no one. I believe investors will be forced to pay attention to the big picture and just simply investing in quality stocks will not be enough, although those investors will probably survive the collapse. He also assume Asia will be the place to be but I think they will collapse with everyone else accept they will survive and move forward where the US may not for awhile anyways.


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## montyloree (Jan 16, 2010)

hey dogcom...
The good thing about China is that they're spending cash reserves... (that's not really good,)... but the point is... I don't think China is in debt....

They're carrying alot of debt from the U.S. and the whole world. This is a huge asset to them.

That's probably the logic behind what visionvictory is saying.


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## dogcom (May 23, 2009)

I believe China and India and so on will be the place to be in the future like the US at the turn of the century. You have to remember however the US was destroyed in the depression of the 30's although it was the place to be. So I believe China will get hammered like everyone else before it can move forward.


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## Larry6417 (Jan 27, 2010)

DOW 1000 or 40,000?

Actually, neither is likely. I looked up the best and worst rolling 10 year DOW returns. The worst returns are from the last 10 years and just before the 1929 stock market crash, with nominal returns of ~ 0%. Therefore, a rolling 10 year return of -90% seems awfully unlikely. The best rolling 10 year return was just after WWI, ~ 20% annually which would give a return of ~ 6X. Thus, a return of 4X return in a decade has been more likely than a drop of 90%. I don't think 40,000 in a decade is likely because the DOW's PE is still high by historical standards. Also, the start of the 20th century was a lkely much brighter time for the U.S. than today.


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