The Dow's Phony New High

[Dardedar]

The Dow's Phony New High

by Michael Nystrom
Tuesday October 3, 2006
Cambridge, MA

The Dow closed at its highest level ever today, and the mainstream press will certainly have a field day celebrating. This is BIG news - the kind you see recycled every half hour on CNN Headline News® until you're both thoroughly sick of it and also thoroughly brainwashed. Big, shallow news.

At 12:33pm EDT today, Marketwatch.com breathlessly reported:

NEW YORK (MarketWatch) -- It took nearly 7 years, but the Dow Industrials has erased the memory of the post-millennium bear market by reaching a fresh all-time high on Tuesday…

But look beyond the headlines, and you see a different story. While the Dow hit a new high today, not a single of its component stocks did. Interesting, isn't it? The index is at a new all time high, but 70% of its components are down 20% or more!

The Dow Jones Industrial Average is composed of 30 stocks. Of these, fully one third of them - 10 stocks - posted their all time highs last century:

--snip--

Only 7 stocks made their new high in 2006, and of these only 3 of them are within 5% of their new high today. 21 of the 30 Dow stocks - that is 70%, folks! - are down 20% or more!

See for yourself in this chart:

--snip--

As I pointed out in my earlier article, Manipulation, if the Dow were to make a new high, it would be a phony new high, since adjusted for inflation, we are nowhere near the old highs. Using the Fed's very own CPI Inflation calculator (Thanks to George Ure at Urban Survival for keeping a handy link to this calculator right on his homepage) we find that we'd need a 13,817 Dow today to equal the 11,750 Dow of 2000. Put another way, today's Dow High of 11,754 is equal to only a Dow of 9,995 in 2000. Pfffttt - we didn't even make Dow 10K!

If you calculate the Dow using real money - gold - you find an even worse picture. Measured in Gold, today's Dow is equivalent to only about 5,100! Using an average gold price of $275 in 2000, we establish our year 2000 benchmark: 10,750/275= 39. Using today's gold price of $580, we have 10750/580=18.5 From 39 to 18.5 is a 52.5% drop, which is equivalent to only Dow 5K!

So is it really a new high? No. But please let me know if you hear any of this mentioned on the evening news tonight.

....

the rest

[Barbara Fitzpatrick]

Of course it won't be mentioned. The Rs are trying to convince regular Americans that the "downturn" they live with - stagnant wages, declining benefits, increasing costs in energy and healthcare - doesn't really exist. Jim Hightower talks about a "Doug Jones" average, and that's getting unfortunately close to what ordinary people were going through in the mid to late 1920s before the stock market bubble burst and vast fortunes came crashing down. Ordinary folks were holding on, but by their teeth and toenails. That's why they had no backup when the crash came. That's why we will have no backup when the new crash comes, which it will, if this group of unpatriotic "neocons" - and con is right - aren't pulled out of office ASAP.