How now Dow?

 

James McIntosh writes in the Wall Street Journal that the Dow Jones Industrial Average (DJIA) has underperformed the S&P 500 since the late 1970s and early 1980s, with a 30 percentage point gap in the past four and a half years. He argues that the DJIA is poorly designed, giving disproportionate weight to certain stocks based on share price rather than market value. McIntosh also notes that the committee responsible for selecting DJIA members has made some good choices but has missed the mark in recent times, with interest rates having shifted permanently higher and big tech dominating the stock market. This is an important thing the Dow is telling us, says Mr. McIntosh.

Separately...

The Greater Fool Theory is the idea that, during a market bubble, one can make money by buying overvalued assets and selling them for a profit later, because it will always be possible to find someone who is willing to pay a higher price.

CNBC: ARE YOU BULLISH? ARE YOU BEARISH?

BOAZ WEINSTEIN: SO THE MARKET IS FOGGY, RIGHT?

WE HAD SIX FED CUTS PRICED IN JUST A FEW MONTHS AGO.

NOW WE HAVE ONE.

MAYBE WE'RE GOING TO ZERO.

THE WAY THINGS CHANGE IS

INFLATION, HAS IT BEEN KICKED,

ARE WE GOING TO HAVE HIGHER FOR LONGER?

I THINK AT LAST A VERY

HEIGHTENED AMOUNT OF

UNCERTAINTY, EVEN JUST TAKE THE

GEOPOLITICAL SKIRMISHES/WARS

THAT WE HAVE.

WHEN YOU PUT ALL OF THAT

TOGETHER, HIGHER FOR LONGER,

WHICH MEANS HIGHER INTEREST

RATES, WHICH MAY BE GREAT FOR

THE LENDER, BUT FOR THE BORROWER

IS TERRIBLE.

I THINK WE ARE GOING TO HAVE A

CREDIT CRUNCH IN THE NEXT COUPLE

OF YEARS, IF THINGS DON'T

CHANGE.

AND EVEN IF YOU TAKE THE 100

LEADING ECONOMISTS, THEY'RE

PRICING ABOUT A 35% CHANCE OF

RECESSION, A HARD LANDING.

YET THE CREDIT MARKET, JUST LOOK

AT CORPORATE CREDIT SPREADS, ARE

ALMOST AT THE LOWS OF ALL TIME.

SO I THINK THAT CREDIT DOES NOT

OFFER INVESTORS ANY KIND OF

SUITABLE MARGIN OF SAFETY RIGHT

NOW, CORPORATE CREDIT, THAT IS.