Dow Jones Average Climbs Above 10,000 Mark

Ten thousand is just a number, but it has created a great deal of excitement in the investor community, considering that the Dow Jones Industrial averages had dropped below 7000 in March of this year. The 10,000 level Dow is an important psychological level to people who watch Wall Street for signs of how the nation's economy is doing. The television business channels-Bloomberg, Fox Business Network, CNBC and the general news programs have been touting the number as the financial averages are making a strong comeback behind stimulative Federal Reserve and Treasury policies. Government backing of financial institutions, combined with a low interest rate environment, has fueled the rise, as corporations take advantage of low borrowing costs, cheaper energy, and job cuts. But is the government creating another "bubble" just like the one that caused the October 2008 crash? And what does the 10,000 Dow recovery signal for the average investor? And then again, in times like these, who is the average investor?

For me and for a lot of people, the importance of the industrial averages is how it affects private pension funds. Some private pensioners lost as much as 40 and 50 percent when the housing bubble burst and the banks and insurance companies faltered in 2008. My own pension investment strategy was conservative, with nearly 80 percent invested in government securities. Of the 20 percent invested in a stock mutual fund which tracked the S&P 500, I was just another one of the suckers who couldn't stay ahead of the slick investor pack who make money no matter what direction the market goes. Having lost about 35 percent in the part of our savings invested in stocks, I wanted to stick it out but got scared and locked in my thousand dollar losses. Had I not pulled money out of the financial markets, my losses would have been lessened by about half. The Dow was at 8000 when I dropped out; the 10,000 mark causes me a bit of pique but I'm not tempted to get back in unless I have money I can afford to lose. My guess today is that 10,000 may be the "new normal" but the Dow will dip below that mark before it crosses it again.

Frankly, I'm disgusted with the current state of economic affairs, the government policy of "too big too fail" and its inherent prejudice against small business which still finds it difficult to borrow and expand. Nor does the cheap dollar policy help people who labor and save and are responsible in their financial affairs. Government created the bubble and, to my mind, government is in the process of creating another one.

I'm not a financial advisor but, if I were one, I would have little but the traditional wisdom to offer. Younger people who work and save cannot afford not to be in the market. The real economy will eventually recover because that's how free markets work, government artificial measure notwithstanding.

To those approaching retirement, I would say that they shouldn't become intoxicated with the 10,000 Dow euphoria. The "recovery" (if there is one) is primarily in financial firms like J.P Morgan which reported better than anticipated earnings. There are other positive signs from publicly traded companies but there are a lot of negatives and double-edged swords. Unlike the average schmucks, investment firms and hedge funds cannot afford to have their money sitting around in CDs or money market accounts at 1 percent interest. Such firms are "market makers" and make money on stock declines just as they make money on share price increases. In the real world of retail, however, people are not buying in the stores. Prognosticators tell us the signs are shaky for the Christmas buying season.

The drama on Wall Street today may create enough excitement to draw mom and pop investors back into stock investing, further increasing the price of stocks. With more money going in the rally will continue. If the Dow closes above 10,000 today, it will undoubtedly contribute to confidence in the economy. Eventually though, it all gets back to the "fundamentals". How do the company earnings compare to the price of the stock? How many companies and what type of company is benefiting from government largesse? When will the consumer benefit? Most importantly, when will the millions who have lost their jobs be able to share in the "recovery" by having enough money left over after paying their debts to save a little for their future?

Wall Streeters are necessarily glib and cold-blooded on this matter. The 10,000 Dow is the front story. Jobs are a "lagging indicator," as they say.