The Big Picture

« Looking at the Very Very Long Term | Main | priced in? »

Dow 10,000 and "Buy & Hold"

Friday, November 07, 2003 | 08:45 AM

A few articles were the prime motiviation to my looking at a logorithmic DJIA chart going back nearly a century. The first was a WSJ article, mistitled "Investors Battle Curse of 10000." To me, its not that any given round number is cursed; Rather, its that periods following long Bull markets tend to be a sideways affair. That's how in most of the prior excesses -- valuation, capacity, governance -- get worked off. (Add in a major war just to be historically parallel).

Additionally, the geometric chart the WSJ used (see below) presents a very misleading picture. When presenting a 40 year plus period, a logorithmic chart looks far less "toppy."

The second article -- "Long-Term Investing Quietly Gets Vindicated Again" really pissed me off. Its a classic "Buy & Hold" piece of nonsense that you only will see AFTER a nice long run in the indices. You will hardly ever read this tripe in the midst of a Bear market, for a variety of psychological and editorial reasons.

double click for full image

Chart courtesy of: WSJ

Sources:
Investors Battle Curse of 10000
by E.S. Browning, WSJ, October 20, 2003
http://online.wsj.com/article/0,,SB106639890121763600,00.html

Long-Term Investing Quietly Gets Vindicated Again
Chet Currier, Bloomberg
October 17, 2003
http://quote.bloomberg.com/apps/news?pid=10000039&sid=anQ37dD6l1ys&refer=columnist_currier