Tulsa World: Dow again flirting with 10,000

MAKE US YOUR HOMEPAGE | Sunday, November 22, 2009 | WIRELESS

Home > Business

Newspaper View Print this story

Comment

RSS

Bookmark

Dow again flirting with 10,000
While reaching the milestone might be good for investors, some analysts still express caution.

By JOHN STANCAVAGE World Business Editor
Published: 10/13/2009 2:24 AM
Last Modified: 10/13/2009 3:47 AM

The Dow Jones industrial average seems poised to return to the 10,000 level this week, but analysts are wondering what larger impact that modest milestone might have.

The widely watched index closed up 20.86 points Monday to close at 9,885.80 in light holiday trading. That was a high for 2009 and a continuation of the considerable improvement made since its recent low of 6,547.05 on March 9.

Still, the last time the Dow closed above 10,000 was Oct. 3 of last year. And, the select blue chips remain down about 30 percent from their all-time high of 14,164.53 on Oct. 9, 2007.

"I'd be shocked if we don't reach 10,000 in the next few days," said Jake Dollarhide, CEO of Longbow Asset Management in Tulsa. "It probably won't mean as much as the first time the Dow crossed that mark, but psychologically it will be good for stock investors.

"It should put some stability back in the market and give people renewed confidence in equities."

Dollarhide is among the professionals who are highly optimistic about Wall Street's prospects. The Tulsa money manager said the market could begin a one- to two-year bull run next year.

"The Dow could be up 20 percent in 2010," he predicted in a telephone interview. "Overall, I'd say there's a much higher probability of the index going back to 14,000 in the next few years than it returning to 6,500."

Dollarhide said there are a number of factors driving the market's resurgence, including growing signs of worldwide recovery, an increase in credit available, government stimulus spending and low interest rates.

Another Tulsa financial planner, James "Skip" Nichols, said he also believes the Dow returning to 10,000 would be a "big deal," but is cautious about the future.

Nichols, who owns Financial Planning Resources Inc., said he recently returned from an investment conference in Chicago where industry speakers disagreed somewhat on the outlook for the equities markets. Some were very bullish, while others were not sure stocks will rebound as high or as quickly, he said.

Analysts from one mutual fund firm said the "new normal" for the market could be slower growth and lower corporate profits for the foreseeable future, Nichols recalled.

The money manager said there is a feeling in part of the industry that it could take a considerable amount of time for investors to embrace equities again.

"The market drops that followed the bursting of the tech bubble and the attack on the World Trade Center almost could be seen by investors as anomalies," Nichols said in a telephone interview. "The Federal Reserve handled those incidents well, and confidence remained.

"But this time people were hurt so badly. They were shocked by the free-fall, with companies going bankrupt and the government having to bail out firms. After all of that, I think it may take a long time to get back to where we were in terms of confidence."

Dollarhide is suggesting that his clients add stocks to their portfolios, particularly shares in the financial, information technology and consumer discretionary spending sectors.

"Financials, such as banks and insurance companies, were hit so hard that they really could move a lot higher," he said. "Also, computer stocks such as Apple are worth looking at, as well as consumer issues like Wal-Mart Stores, Target and Kohl's on the retail side and staples such as Kraft, Coca-Cola and Pepsi."

Nichols said he recently has begun to believe the old strategy of buying and holding stocks through big market swings no longer is the best bet for many investors. With the outlook uncertain for the next few years, he is taking a more conservative approach, especially now that clients are sitting on some profits from the summer upturn.

"I am suggesting that my clients protect 25 percent of those profits by putting that money into bonds or absolute return accounts, which are like a mutual fund that also is a hedge fund. In this type of account, the manager has the flexibility to go to 100 percent cash if he wants to."

If the Dow goes past 10,200, Nichols is advising that people put an additional 25 percent into bonds or the absolute accounts, and then keep a close watch on the economy.

"I think we're going to need to approach stock investing differently in the next five to eight years," he said. "There will be times to be in the market and times to be out."

Nationally, some observers are concerned that little is being done to shore up the weaknesses that have been exposed on Wall Street.

"The policies put forth by the Bush administration and later Barack Obama did a good job of restoring some confidence in the markets," said financial author William Cohan, who will speak Thursday at Oklahoma State University's Tulsa Business Forum on the role of corporate greed in the recent collapse.

"But the way it was done was sort of a morphine drip. It made us feel good, but how do you remove the morphine without all of us going into shock?"

The Dow's fairly rapid rebound and move toward 10,000, in that respect, may not be entirely a good thing, he said in a recent telephone interview.

"If the Dow was still at 6,500, people would be freaking out. As it stands now, we feel better, yes, but there's not much corrective action being taken."

John Stancavage 581-8314
john.stancavage@tulsaworld.com By JOHN STANCAVAGE World Business Editor

Newspaper View Print this story

Comment

RSS

Bookmark

Reader Comments

Show: Most Recent Comment First

Add your comment

3 comments have been made on this story so far. Tell us what you think below!

Reporting Comments

If you see a comment that violates our terms and conditions, please help us by clicking the "Report this Comment" link next to a comment. That will alert the web staff to review the comment. Thank you. -- Web Editor Jason Collington

	Report Comment olddude, tulsa (10/13/2009 8:11:52 AM) Let's blame Obama for this increase in the markets.
	Report Comment Loophole, (10/13/2009 5:01:35 PM) Wall St. is the only one that will profit from 10k. They keep telling us that we're in "recovery" when 7.2 million jobs have been lost despite trillions of dollars thrown at it only to line the very pockets of those getting the unconscionable bonuses that broke us in the first place.
	Report Comment charlestace, Tulsa (10/13/2009 11:14:02 PM) Look for the market to peak soon at 10,300 to 10,700, then crash like nothing you've ever seen, settling eventually at 3,000 to 5,000. Reason: there are no EARNINGS behind this runup in stock prices. Price-to-earnings ratios are in the 20s, a ridiculous figure.

Add Your Comment
In order to post a comment on this article, you must sign in to Tulsaworld.com. If you do not have a site account, you can create an account for free.