Thursday, November 20, 2008

Stock Market Values Going Back in Time

Today, the Dow closed at 7532, its lowest level since March, 2003. Yesterday, I wrote that I'm still not buying stocks and am waiting for a Dow 4000 (or 12,000) before purchasing any stock. Extrapolating the past two days of 400 point drops , that may be only nine business days from now, or December 4, 2008 :-)

A Dow close below 4000 would be a level that has not been personally witnessed by many young investors. March, 1995 was the last time the Dow closed below 4000. I'm estimating average P/Es would be near 8 and average dividends would be near 8%, levels not seen since the 80s. A 4000 Dow would be the trigger for me to starting buying again, especially for long term accounts like retirement and college savings. It may be a buying opportunity that we won't see again for another generation.

However, even at a 4000 Dow, I won't invest all our available cash. Just in case, I'd want to some funds for the possibility of the Dow going below 2000, which hasn't happened since May, 1988 :-) Now that would truly be a buying opportunity of a lifetime.

For more on Crossing Generations , check back every Thursday for a new segment.

This is not financial or investing advice. Please consult a professional advisor.

Copyright © 2008 Achievement Catalyst, LLC


Shadox said...

Wow. You're a pessimistic one. Personally I believe in continuing to invest through good times and bad. We put in the same amount of money into the stock market every month, whether the market is up or down. The past year has been pretty painful, but market timing has repeatedly been shown to be an ineffective strategy.

Super Saver said...

@ Shadox,

I guess the market has beat virtually all the optimism out of me :-)