When the Dow Jones Industrial Average hit 10,000 for the first time in March 1999, I was standing on the financial floor of the Chicago Mercantile Exchange. A large roar of approval rose from the traders as the Dow hit that historic and unprecedented benchmark.
While many people at the time felt the market may have been ahead of itself, the overall feeling was one of optimism. In fact, the Dow had corrected more than 20% the year before from its impressive late 1990s run so it appeared that there was clear sailing ahead. These were the days when bears were ignored as being anachronistic and the new paradigm was being touted. Remember? Things like price earnings ratios didn’t matter anymore, a company didn’t need to show profit for its stock to grow exponentially. The Dow was headed to 35,000.
I am not to sure what the reaction was on the financial floor of CME Group today, now located at the Chicago Board of Trade building. I am guessing it was much more subdued and not just because there are far fewer traders.
While many experts are still pushing equities and this current bull move, these are the experts who missed the 2000-2002 bear market, they are the experts who dismissed the credit crisis and declared it over before it began in earnest. They have said the same thing all along and like a broken clock; they are bound to be right at least twice a day or in this case, twice in a decade.
Equity cheerleaders aside, there is much more caution in the reaction to the current move. Comments on newswires are expressing disbelief and warning of impending doom — perhaps that is a sign this rally is sustainable but I doubt it. We are in a recession, perhaps technically we have grown out of it in the third quarter but the jobs have not come back and the skyrocketing debt has not been paid off.
Perhaps this is just the market adjusting to a weaker dollar as some technicians believe explains the 2007 high. Will Fed Chairman Ben Bernanke call this irrational exuberance? I doubt it. At least in the 1990s the irrational rally didn’t occur in the midst of a recession. One thing is for sure, no one has any excuse for getting caught up this time. We have two examples this decade that the market goes down as well as up and the next one may me more painful than the others.
