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Showing posts from October, 2008

How low will the Dow go?

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A frequent topic of conversation these days is the declining market. It is particularly interesting because so many people are affected by it, and certainly my own portfolio has taken a real bruising over the past year.

I told my broker my original thesis last March that the credit "issues" back then would have repercusions in the real earnings power of companies and bring down stock prices to the Dow 10,000 level. We made a lunch bet on it - I won that one. Now the question is how much further it will fall - or have we reached the bottom.

There are many pundits in the market today. They talk about the pressure of Hedge Funds, and the deleveraging of the credit market. I think about the habit of history repeating itself. Maybe not in the terms of the Great Depression - but possibly in the terms of the 1970's and early 80's. So I thought I would do a bit of research and share it...

First, I decided to look at the DJIA price 20 years ago and what the Inflation rate…