Burying the Dow's lost decade
The index reclaimed its 1999 year-end levels Tuesday after more than 10 years of doldrums. Now we have a chance for a fresh start.
We are not running in place. In fact, what we are doing is breaking out on the last laggard index out there, the Dow Jones Industrial Average ($INDU), which closed the year 1999 at 11,497. Take a look at where we are: Tuesday we finally got back to where we were 11 years ago, although there was a heck of a lot in between.
Why focus on this number? Because for many people, we have been involved in a 10-year bear market, one that left us worse off than we were a decade ago, one that left us, without dividends being reinvested, in a lost decade of stocks. It's been a repulsive period for the alleged asset class of choice, a decade in which gold has done so much better, in which you made more money in bonds, in which you would have done so much better not indexing -- at least to the Dow.
I think this is a very important milestone. I think it says that we have a chance for a fresh start in 2011, when we could break out of a range that has haunted us.
We've come a long way since the generational bottom in March 2009, a very long way. But the big-cap stocks have been a curse to portfolios everywhere, and the idea of saving for college with these instruments or retiring with them has gone out the window. We can't even believe that at one point President George W. Bush wanted us to be able to handle our own Social Security with stocks. Can you imagine?
Every day I hear lots of talk that we've done nothing. But when I look at the Dow, I see lots of stocks that are now selling at very low multiples, given what I expect their growth rates to be in 2011. Just consider 10, 11 and 12. Those are the multiples for Intel(INTC), Microsoft(MSFT) and IBM(IBM), even though I expect acceleration in earnings for all three. Does anyone think GE(GE) can stay down here with the acquisitions it is making and the dividend boosts? (Microsoft owns and publishes MSN Money.)
Post resumes after video.You virtually have to believe the Dreamliner will never get off the ground for Boeing(BA) to stay at these levels. Sure, Verizon(VZ) has had a big move, but would it be so ridiculous to think its stock could hit $49 again someday, where it went 10 years ago, given that Verizon Wireless will soon have the iPhone and is about to start paying dividends to the parent company while the drop-off in landlines seems to be stabilizing?
I don't want to say "Damn the torpedoes, full speed ahead," but don't take the closing price of December 1999 lightly. If we are going to restore this asset class, it has to start doing better over a 10-year period.
Maybe, rather than thinking the market is up enough, the move should be considered a relaunch from the quicksand of 1999 -- a time when stocks seemed to have so much promise but led instead to so much disappointment.
This morning, it looks like we are finally overbought, ready for a possible dinging. I still believe that we are going to have a decent finish for the year, but this last stretch has become a little too good to be true. All that said, I reiterate my belief that sell-offs will be contained between here and year's end, and I am in the mood to buy, not sell, the sell-off.
At the time of publication, Cramer was long Intel and Boeing.
Follow Cramer's trades for his Charitable Trust.
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