If You Think the Dow Did Well Today, You're Wrong

by: Paul Kedrosky September 19, 2008 | about stocks: DIA    
Paul Kedrosky

Paul Kedrosky

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So you think the Dow had a great day today, the best in ages? The headlines agree with you, with banners everywhere trumpeting huge gains. But to one way of thinking, they're wrong -- at least when you get outside the box of thinking only about U.S. markets.

Why? Consider the following table ranking major markets around the world in terms of their gains today. The Dow? It ranked dead last, barely beaten by the Nasdaq Composite and the S&P 500. (Click chart to enlarge.)

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This article has 45 comments:

  •  
    Sep 19 09:06 PM
    You should include the Dow's performance on Thurs too. Those other markets had only 1 day to deal with the RTC and the Dow spread it out over 2 days.
    Reply | Link to Comment
  •  
    Sep 19 09:25 PM
    Look at the timezones. It was the last rally of the week. It's the one that folks sold into. If you look at intraday it's pretty clear that there was a lot of profit-taking going on into the afternoon.
    Reply | Link to Comment
  •  
    Sep 19 09:37 PM
    Worthless article. International markets have also been down the most this year.
    Reply | Link to Comment
  •  
    Sep 19 10:56 PM
    this weeks movements were emotion driven. friday's rally smelt like the skin burning off of the financial shorts. next week reality hits the fan. the US economy is in a world of hurt - and actions this week only helped structure the decline.
    Reply | Link to Comment
  •  
    Sep 19 11:41 PM
    @gaucho - why would I ignore a guy that has significantly more power to move a market than I do?
    Reply | Link to Comment
  •  
    Sep 20 02:08 AM
    Hoping that the interventions will solve the problem is wishfull thinking for the average guy on the street...were in for a lot of blood on main street and Uncle Sam is out of money to help you... If you have Social Security start praying that the benefits will continue. The best thing you can do is start a vegetable garden in your back yard and start raising a few chickens. If you have investments in the market get out now. Plan on keeping your car for another 5 years. Have a tent ready in case you are kicked out of your house because of failure to make payments because you lost your job...this country is out of control!!!
    Reply | Link to Comment
  •  
    Sep 20 02:52 AM
    In real (i.e., gold) terms the DJIA was down over 11% on the week. Today's session was good but not terribly impressive all things considered. Comparison with other markets is instructive for asset allocation purposes if you invest that way, but in absolute terms this week was simply horrible and today was a fairly weak bounce. Do not price assets in dollars; you will be deceived.
    Reply | Link to Comment
  •  
    Sep 20 03:11 AM
    what are you talking about. Asian markets had the time to move on thursday's move and also on the late news throughtout thursday. So, I will compare asian moves to the last 2 days move on DOW, which puts them in the same range on comparison...
    Reply | Link to Comment
  •  
    Sep 20 04:36 AM
    This article was not well thought out...just noise...
    Reply | Link to Comment
  •  
    Sep 20 06:46 AM
    International markets fall more than Dow when things are bad. So it's only normal they go up more.

    It's kind of weird. Dow goes down 4% because of financial problems in the US, and Hong Kong goes down 10% as a response.

    A simple explanation is that most of Hong Kong's economy is financed by US money. US economy is a lot more than Dow.
    Reply | Link to Comment
  •  
    Sep 20 08:21 AM
    "This article was not well thought out...just noise..."

    Maybe so, but a comment like this doesn't add much value, either.
    Reply | Link to Comment
  •  
    Sep 20 08:32 AM
    For what it's worth here is a selective snapshot of Dow closing values from 1987-1991. The volatility in the weeks following the Oct 19 crash was significant, it took almost four years for the '87 high to be surpassed.

    30-Jan-91 2,713
    16-Jan-91 2,509
    02-Jun-89 2,518
    23-Aug-88 1,989
    30-Nov-87 1,834
    09-Nov-87 1,900
    26-Oct-87 1,794
    21-Oct-87 2,028
    20-Oct-87 1,841
    *19-Oct-87 1,739*
    16-Oct-87 2,247
    13-Oct-87 2,508
    25-Aug-87 2,722

    Here's a link to the Wall Street Week episode from that period

    www.youtube.com/watch?...
    Reply | Link to Comment
  •  
    Sep 20 09:09 AM
    As a couple of people pointed out, the rally started Thur when other markets were closed. They were just catching up on Fri.
    Reply | Link to Comment
  •  
    Sep 20 09:31 AM
    AIG was removed from the Dow and Kraft Foods replaced it. What effect did that have??????????
    Reply | Link to Comment
  •  
    Sep 20 09:40 AM
    So, Friday the government announced it will remove up to one trillion dollars of unmarketable and impossible-to-price debt from any and all financial institutions, and add it to out-of-control government debt. In summary, one group of irresponsible debt-ridden balance sheets are transferred to a much larger irresponsible debt-ridden balance sheet. Net asset gain -- zero. Just the statement of intent to re-arrange the debt deck chairs sends the Dow up 900 points in two days. Utter insanity rules the market.
    Reply | Link to Comment
  •  
    Sep 20 10:48 AM
    Making opinions on 1 day of trading is hazardous, but I will venture some anyway. This data illustrates the extent to which the global emerging markets are leveraged to prosperity (or lack thereof) in the U. S. And, maybe confirms again, that longer term more rapid (but also more volatile) growth will be found in overseas markets, not the maturing USA.
    Reply | Link to Comment
  •  
    Sep 20 10:48 AM
    Thanks for pointing how wrong I was. My portfolio gained 4% today and I thought I should be happy!

    For ALL the reasons others have posted, this article shows you cannot be objective. You've lost credibility.
    Reply | Link to Comment
  •  
    Sep 20 10:49 AM
    The point of the article is that the US is also bailout foriegn banks .
    Reply | Link to Comment
  •  
    Sep 20 10:50 AM
    Boy, these US stock investors are like the guy in the Monty Python and the Holy Grail movie. "I'm not dead yet". They keep taking beatings and won't give up. If being that close to complete banking collapse, or the alternative being massive govn't money printing and inflation to temporarily save them, or the spectre of massive credit default swap losses doesn't scare them out of US stocks, nothing will.

    It'll take a few more wallops with the sword to finally put them out of their misery.

    Funny, I recall the days when you bought a stock based on its projected future income. What a rosy picture we have ahead of us, eh? AIG, GM, FM, etc were all "screaming bargains" at one point also.
    Reply | Link to Comment
  •  
    Sep 20 11:09 AM
    Costco just opened 7 minutes ago and I got a call from my Mom telling me that I better get down here they must be having some great sales...the place is packed!
    I think not... I think there might be a little panic buying going on.. a little bit of stocking up now for the inevitable rise in prices post election...
    I imagine next it will be lines at the bank to pull the last of the savings out before the Govt. grabs it to pay for the bailouts...
    Reply | Link to Comment
  •  
    Sep 20 12:16 PM
    Hmmm I wonder why that is. It couldn't be the case that the U.S. markets, the most developed and heavily traded on the planet, do not suffer the volatility of other markets...?
    Reply | Link to Comment
  •  
    Sep 20 12:34 PM
    I think the worse is yet to come.
    Reply | Link to Comment
  •  
    Sep 20 12:54 PM
    I think the warning signs are all there. There is no debate, whats done is done. We should all make an effort to tighten our belts and prepare for some tough times. Find your place on the bread line and break out your riot gear.
    Reply | Link to Comment
  •  
    Sep 20 12:58 PM
    Interesting comparison. I guess the people who knocked the posting of this comparison should share their deepest thoughts with us instead of just putting up a shallow put down. Save the trash talk for your vaunted ping pong prowess.
    Reply | Link to Comment
  •  
    Sep 20 01:08 PM
    Dow ? Who trades anything on the Dow ? Unless you're one of the casino gamblers masquerading as a "portfolio manager", "investment banker", or "hedge fund trader" chances are you rarely trade any Dow stock. And if you do, you lose money. Oh, I forgot. Shorting Dow companies has been very lucrative the past few years. Does that count ??
    Reply | Link to Comment
  •  
    Sep 20 01:40 PM
    Inflation will cure the housing problem, which the government bought for pennies on the dollar. Genius. Problem is that 70 million fixed-income retirees won't be able to afford food. Hey, one problem at a time....
    Reply | Link to Comment
  •  
    Sep 20 01:51 PM
    Here and abroad, bear market rallies have always been characterized by sharp, violent short squeezes that last several days.

    Interesting graphic kept flashing on CNBC yesterday... "Dow two day percentage gains largest in 79 years, since October 31, 1929".

    Now THAT was a great time to go long, eh?
    Reply | Link to Comment
  •  
    Sep 20 02:37 PM
    Bought 3000 shares of Lehman (LEHMQ) today (Friday) and doubled my money by the end of the day. Now if it will just get back to 100.
    Reply | Link to Comment
  •  
    Sep 20 02:39 PM
    Paul (author),

    This type of article is best left to the Bespoke Investment Group that syndicates on Seeking Alpha as well.
    See: bespokeinvest.typepad..../
    Statistical comparisons is their expertise and they offer clients a lot more useful and comprehensive information at the push of a button.

    Your insights in other areas are much appreciated.

    Thank you,
    CrossProfit
    Reply | Link to Comment
  •  
    Sep 20 03:36 PM
    "This type of article is best left to the Bespoke Investment Group that syndicates on Seeking Alpha as well."

    ______________________...

    I visited the Bespoke link you referenced and found their chart of global markets Sept 18-19*. For some reason the Bespoke chart excludes the S&P TSX (+8.7%) as well as US indicies. In addition it does not indicate the specific index they are measuring just the country of origin. Perhaps the complete anaylsis is on their subscription site.

    * bespokeinvest.typepad....
    Reply | Link to Comment
  •  
    Sep 20 04:50 PM
    Paul Kedrosky's entry here is successful if not misleading. It has successfully drawn in a relatively large number of responses if not for anything other than for posters to tell him he's wrong. I agree with posts above that the International markets had largely one day to react while we had two days. If we add the two days and divide it by Wednesday's close, we're in the top half of market returns.
    Reply | Link to Comment
  •  
    Sep 20 06:00 PM
    The Dow did extremely well on Friday ,following Thursday's rally and is a prelude to a major rallies ahead.Friday's performance is not about the relative comparison of the global equity indices,it is a measure of the investors approval to the coordinated measures to the market volatility and vulnearability.Clearly ,various U.S "offices" are on the right track.More global coordination should should follow.The FED should lower FF by at least 50 BPS,and the shorts should be kept on the "run".
    There is a strong posibility that this short covering will turn into a broad based rally.
    Reply | Link to Comment
  •  
    Sep 20 06:10 PM
    You americans will be socialists in less than 10 years.

    The state will own everything and you'll receive a monthly wage to pay for your expenses and limited amounts of food, guns and tapped water.
    Reply | Link to Comment
  •  
    Sep 20 07:00 PM
    gabeborenstein states in his comment above:

    "...Friday's performance is ... is a measure of the investors approval ..."

    "There is a strong posibility that this short covering will turn into a broad based rally"
    ______________________...

    These two statements seem at odds with one another; am I missing something?
    Reply | Link to Comment
  •  
    Sep 20 07:13 PM
    maybe, comrade, but that still means we have ten years of freedom left. in ten years, americans can still load up their planes and blow your country off the map. so, stop annoying us.
    Reply | Link to Comment
  •  
    Sep 20 07:15 PM
    enervingmarkets, half this country hopes you're right. The rest of us are voting for McCain.
    Reply | Link to Comment