The Big Question

The Big Question is how can we be at 18,000 on the Dow and 2,100 on S&P 500 when things are so bad.

• Interest rates are near zero until you get out 10 years, many places in the world have negative rates,
• GDP is in the toilet,
• Market overvalued on a price/earnings basis
• Buybacks distorting the market
• and who knows have many negatives people can drum up that I haven’t bothered to pay attention to. Things can’t get much worse, right?

What if the bears are right and things really are pretty bad in the investing world right now? And yet we are at 18 thou Dow.

Maybe (prepare for heresy) 18,000 really isn’t very good. Maybe if things were really cooking, we’d be at a lot higher than 18,000. Maybe double. (Wasn’t there a book on Dow 36,000?) Adjusted for inflation, the all-time highs for the Dow are up a ways from here.

If you look at 18,000 Dow as the result of the worst case of circumstances, it changes things.What would it take to drop the market even further?  A recession?  Not likely, job numbers keep improving.  What would it take to push us higher?  Even a bit of good news?

Under this assumption, things would have to grow even worse for the bear scenario to happen. If things stay as they are (admittedly crappy) then there isn’t much that needs to go right in order to the market to move up exponentially.

I can’t predict the future, and I don’t even want to appear to try. But those of you waiting for the market to crash may have already seen it and good times aren’t too far away from happening.