After the run-up we’ve seen, 400 pts is a blip. To be worrisome (or a great opportunity) we need 1-2k drop.
I was more of a secular bear on the Dow until I spent more time looking at the internationl reach of most significant Dow companies. (I spend more time looking at small caps, and let my mutual funds handle the Large and Mids.) I am still a short-term (6 months) bear, but my longer term outlook has actually improved.
Take Coke, for example: It has huge market share in Europe. With a decent economy there, and a falling dollar, Coke is making more dollars for every Euro they get. As the dollar weakens, the international sales of Coke become more profitable AND people in the US are not likely to become so destitute as to cut out buying a Coke! In fact, the less money people make, the more likely they are to buy fast food (and a Coke). (True also for the latest round of newly minted soon-to-be-citizens-if-congress-gets-its-way. With a healthy run-up this year and a fair dividend, there are still profitable investments in the Dow. Ditto JNJ, Bud, P&G. Traditional beer and band-aid stocks.
Though I can see as much as a 1500 point drop as very plausible over the next year, over the long term I think the Dow and other indices will do OK. This is not (yet) an equity buuble anything like the 1999-2001 tech bust.
There may be better ways to make money out there, but IMHO stocks will not crash long-term alongside housing.
There is too much private money out there looking for a home–China’s investement fund is reported to have nearly $750B cash. As small cap and housing (US and Europe) take a dive, that money will seek security somewhere–like Blue Chips.
And that prediction has my 110% moneyback guarantee!!! (I guess you get what you pay for…) ;^)
