This is an exciting day for investors: The Dow finally crossed 10,000. On the one hand, this news shouldn't be entirely dismissed. In March when the market fell below 7000 plenty of people expected the bottom to be in the 5000s. Six months later, it's up 50 percent. At the very least, I hope it puts to rest the silly argument peddled in the WSJ that the stock market was allergic to an Obama presidency.
But just as it was dumb to criticize Obama for the Dow number in March, it would be unwise to praise him for the five-digit breakthrough today, because as the markets have soared in the last six months, the Dow belies an economy that's dragging itself around like it's got clipped wings. Retail is flat. Unemployment is historically awful. The consumer-based economy and job market could take years to get to 2007 levels.
Fact is, the the 10,000 number isn't so much fool's gold as thin gold plating around our economy -- a shiny, valuable-looking veneer that disguises the actual makeup of the object. Via Max Fisher, Peter Bookvar makes an excellent point about why it's unwise to use stock market performance as a bellwether for overall economic health:
With the DJIA approaching 10,000 again, let's reminisce about 1999, the year it first passed that magic level on March 29th. Millennium by the Backstreet Boys was the best selling album, American Beauty won the Academy Award, the Euro was established, SpongeBob SquarePants aired for the first time, Hugo Chavez was elected President of Venezuela, Karl Malone, Pudge, Chipper Jones, Jagr and Kurt Warner won MVP awards and the average price of a gallon of gasoline at the pump was about $1.20. US nominal GDP ended at $9.6b vs $14.1 as of Q2 '09. Also, on March 29th 1999, the DXY was at 100.36 (now 75.60), the CRB was at 192.40 (now 269.15), gold was at $280 (now $1,060), oil was $16.44 (now $74.80), corn was $2.32 (now $3.85), copper was $.62 (now $2.83), the 10 yr yield was 5.19% (now 3.38%), and the fed funds rate was at 4.75% (now 0-.25%). Oh, how time flies.