[roccman]

According to Barron's they are now at -81.34 and the P/E Ratio form of measure is now N/A.

Got gold?

[frankthetank]

Can u elaborate a little on what this chart is saying...? I really don't have a clue!

[FrankRichards]

$this->bbcode_second_pass_quote('frankthetank', 'C')an u elaborate a little on what this chart is saying...? I really don't have a clue!

[BigTex]

I don't know where that figure came from, but I think it's misleading.

I looked at the 30 companies in the index, and it looks like the average earnings are really only being pulled down by a couple of the financials and GM.

It looks like more than 25 of the companies have positive earnings.

However, depending upon how you calculate it, GM's loss alone could wreck the whole average, since GM is showing a loss of $74 per share and is trading at $10 per share. That alone would be enough to skew the average earnings down, but that's just one company.

I would like to see what the DJIA's earnings look like without GM.

[Cashmere]

It's a graph.

In my opinion, if a graph represents a complete data set, then the graph itself cannot be misleading.

Perhaps it can be argued that the dataset that was selected is misleading.

For example, if you did a graph of all likely voters, but you had a squirrelly definition of "likely", then that would be misleading.

This graph, IMO, couldn't be more straightforward, unless the $ amount on the y-axis was given.

DJI total earnings.

That is, you add up all the earnings and losses of all the companies on the Dow, and you plot it for that time point.

Simple.

I suppose it could be said that the data are <i>skewed</i>, but I don't think misleading.

Thanks for posting RM.

By the way, the most interesting thing to me about this is the rapidity with which the cliff was traversed.

The main reason that you don't see dips below zero at any point since the graph begins during the 1st Great Depression is because the folks who run the DJ will pull companies off the Dow as soon as they show repeated bad performance. It happens all the time. GE is the only company that was an original member of the DJIA that is still included.

So, to me, what this graph really shows is the rapidity of the change.

Bad news shown in vivid imagery.

[roccman]

$this->bbcode_second_pass_quote('BigTex', 'I') don't know where that figure came from, but I think it's misleading.

[BigTex]

I guess I would find it more alarming if 30 companies had negative earnings, rather than 27 companies having decent to good earnings, two with bad earnings and one with incredibly awful earnings.

A median per company to go with the index's totals might be helpful too.

I think a lot of the losses that are showing up at GM are also bad stuff on their books that they are trying to clear off now rather than later, on the theory that who cares whether your losses are $40 or $80 per share?

I thought WAMU's strategy of basically doubling the number of outstanding shares to raise capital earlier this year was brilliant in a twisted way. When you have losses, issuing more shares will show a smaller PER SHARE loss, which can provide a way of disguising how bad things are to some investors.

Thanks for the chart though Rocc. It's interesting that this isn't being discussed anywhere else.

[cube]

$this->bbcode_second_pass_quote('MattS', '')$this->bbcode_second_pass_quote('roccman', '
')
Got gold?

[roccman]

$this->bbcode_second_pass_quote('BigTex', '
')
Thanks for the chart though Rocc. It's interesting that this isn't being discussed anywhere else.

[Cashmere]

$this->bbcode_second_pass_quote('MattS', '')$this->bbcode_second_pass_quote('roccman', '
')
Got gold?

[Tyler_JC]

The DJIA has to allow for the replacement of failing companies.

* American Cotton Oil
* American Sugar
* American Tobacco
* Chicago Gas
* Distilling and Cattle Feeding
* General Electric
* Laclede Gas
* National Lead
* Tennessee Coal & Iron
* North American
* U.S. Leather
* U.S. Rubber

Those were the original 12. Do any of those companies with the exception of GE even exist anymore?

The S&P 500 is generally a better measure of the performance of the stock market because it uses a larger base. Even the S&P has a nasty habit of including too many bubble stocks.

Yahoo! was added to the index when it was trading at over $100 per share in 1999 (2000?).

The Wilshire 5000 is an index of ALL of the shares of every company traded in the United States.

I've looked at charts comparing the two broad indexes and they actually trace each other quite well.

Unfortunately, the DJIA stopped tracking the S&P after the tech boom.

Dow Versus S&P

When mutual funds measure their success, they talk about success versus the S&P, not the Dow. The Dow contains 30 extremely well known companies but is too limited to give a real overview of the stock market.

The net losses of the DJIA are an indication that the Dow includes too many financial companies (5 out of 30). Bank of America was added in February of 2008, just before it started losing billions of dollars. Honeywell was taken out of the index despite its continued profitability.

If you go back to the index used before the Honeywell/Bank of America switch, we would be up another couple hundred points.

Long story, short. Feel free to use the S&P 500 as a gauge of the stock market and ignore the foolish DJIA.

[BigTex]

Permanent Portfolio (PRPFX).

23 up years, 3 down.

Doomer sleep aid.

[cube]

$this->bbcode_second_pass_quote('MattS', '')$this->bbcode_second_pass_quote('cube', '')$this->bbcode_second_pass_quote('MattS', '')$this->bbcode_second_pass_quote('roccman', '
')
Got gold?

[Twilight]

Buying gold at this level is stupid. You may think it is money, but it is just a liquid vehicle to people much bigger than you, with positions much bigger than yours. Once they dump to cover the implosions beginning to ripple through their investment assets, you will be screwed. And dump they will, if they can wipe out a bad bet with one that may have a 200% profit or more. I do not see this as a perpetual hedge, it will be used in the end. A real crash will result in the mother of all visits to the pawn shop. Gold is really starting to sound more like mainstream hysteria than rational thinking.

[Tyler_JC]

Shorting the DJIA is a bad idea because the index is designed to over-perform the general market.

When they finally take GM out of the index and replace it with Google or Berkshire Hathaway, the index can continue to march upward. The actual index itself is too easily affected by changes in membership to be a useful gauge of the US economy or even just the stock market.

[roccman]

$this->bbcode_second_pass_quote('MattS', '
')
What are you talking about? I lost my pants buying gold in 1980 listening to commodity crazies like Roccman,

[cube]

$this->bbcode_second_pass_quote('Twilight', 'B')uying gold at this level is stupid. You may think it is money, but it is just a liquid vehicle to people much bigger than you, with positions much bigger than yours. Once they dump to cover the implosions beginning to ripple through their investment assets, you will be screwed. And dump they will, if they can wipe out a bad bet with one that may have a 200% profit or more. I do not see this as a perpetual hedge, it will be used in the end. A real crash will result in the mother of all visits to the pawn shop. Gold is really starting to sound more like mainstream hysteria than rational thinking.

[roccman]

$this->bbcode_second_pass_quote('MattS', '')$this->bbcode_second_pass_quote('roccman', '')$this->bbcode_second_pass_quote('MattS', '
')
What are you talking about? I lost my pants buying gold in 1980 listening to commodity crazies like Roccman,

[cube]

$this->bbcode_second_pass_quote('MattS', '')$this->bbcode_second_pass_quote('cube', ' ')A new oil well or gold mine cannot be brought into production in 6 months. If it only takes 6 months to open a new dot-com company or build a house that's why after only 6 years the market is over-saturated and has reached its peak. That's why the dot-com bubble and real estate only lasted for 6 years.
Even if you do not believe in PO and are convinced there's an oil reservoir the size of Texas somewhere on this planet you have to admit it is physically impossible to over-saturate the world oil market in 6 years. It doesn't matter if ALL the world's oil drilling rigs are working 24/7/365 ---> the world will not be swimming in oil in 6 years.
Maybe 12 years but not 6.

[BigTex]

In the 1970s, if 25% of your investments had been in gold, you would have been up big for the decade.

In the 1990s, if 25% of your investments had been in stocks, you would have been up big for the decade.

It's not necessary to commit everything to one asset class to get a good overall return.

Got diversification?