Dow Hits Record High

I love seeing the green numbers on the Big Board but am also wary of the potential downward adjustment. As Al Cashin is fond of saying, "Stay nimble."

I agree, so much of the rise in stocks is due to the recuperating price of oil worldwide that one can imagine what will happen once the latest OPEC production decrease agreement fails and prices tumble once again.

Correct me if I'm misunderstanding you but according to the U.S. Bureau of Labor Statistics consumer price inflation rose by about 7% since January 2013 whilst at the same time (according to the NYSE) the Dow Jones Industrial Average rose by 92%. If anything the average price of stocks is far outpacing the declining worth of the US Dollar over the last 5 years. From what I understand the main issue with the US economy over the last 5 years isn't so much about whether it can generate growth but about how it can distribute wealth.

goodcalculators.com/inflation-calculator/
money.cnn.com/data/markets/dow/

I wanna bang the gavel!

Adjusted for inflation, today's dow is worth about $1000 in 1916 dollars.

Whether the numbers are being fudged is a different argument but in terms of provoking economic growth, inflation is a net positive. As I understand it, the basic argument goes that inflation represents an opportunity cost for consumers that stimulates them to spend today instead of saving as they fear the loss in the value of their money in comparison to that of goods. Deflation makes consumers think that as their money appreciates over time in comparison to the value of goods and services that they should save their money until a better offer for said goods and services becomes inevitable. The key example of deflation's effect on consumers and the economy being Japan in the 1990s but you can also see this in department store sales figures in the weeks leading up to a large price reduction event. In short inflation stimulates aggregate demand for goods and services which stimulates production which is measured as economic growth whilst deflation reduces aggregate demand for goods which restrains production which is measured as economic stagnation. The problem with inflation is when it gets so high that people either lose faith in the economic system overall (leading to an economic crash or currency devaluation) or in closed system where no additional production can be had (leading to hoarding and speculation). People try to establish whether inflation is risky by determining by its causes: Demand-pull inflation vs. cost-push inflation and whether it's manageable by its effects on existing restraints on the factors of productions.

I don't have a text on hand to reference but I hope the following helps:

en.wikipedia.org/wiki/Demand-pull_inflation
www.slideshare.net/opaprb/ch13-9301579

Bullets, Beans, Baccy, Beer

The four basic survival groups when the carnival ride stops.

In case you want to check it out this paper on the subject of economic concentration of labor markets on wages is really good:

www.nber.org/papers/w24147

That might sound good on paper, but the average American trying to put food on the table is not looking at it as an opportunity cost. They are saying "shite, I could barely put food on the table before, now what the hell am I going to do with prices skyrocketing."

A vast majority of Americans can't save, let alone choosing not to save because they fear the loss of value in their money.

The majority of the people in this country are riddled with debt and don't make enough income to register much above the poverty line. While the soaring stock market might be helping everyone's 401k a little, the reality is that it's a small minority that is truly benefiting.

Big booms always lead to big busts. All one needs to do is look at history for proof.

Hold on to your shorts everyone. My 2 cents.

That's a great plan actually. Downside for someone like me is all my investment at this point is 401k. I'm not sure I can take any out to make liquid without penalty.

I would like to diversify a bit more and have some investments that are not just big mutual funds, but having that cash to do it is another story.

Keeping one’s powder dry and maintaining a proper balance is best whenever possible as opposed to timing markets.

After I retired last year, I did what Darin said in my retirement accounts and went to a 40% fixed income position. The returns aren’t huge but it will soften the blow during the next down turn. I took profit from my outside investment accounts as soon as capital gains season ended last year because a lot of the juice from the expected tax cuts was already baked into stock prices and I wanted to ensure locking in a positive return after a great eight year ride in markets.

Corporate valuations are beginning to rise as well as are interest rates. JMHO but I don’t expect anything negative to happen in equities as long as corporate earnings support this scenario and economic indicators continue to be positive; however, higher interest rates pose a potential risk to the bond market.

Small caps are normally the canaries in the coal mine for equities. When markets attain sufficient risk, they’re normally among the first to show those effects.

Precious metals are a good hedge as well. Silver is currently cheap at $17 and change per Troy ounce and it’ll always be worth something.

The 10 year chart says it all. Just a few years ago silver was almost $45/ounce. It’s being fully mined at present. Used extensively in manufacturing, a global manufacturing run could produce the next similar run.

That's interesting about silver. Never even thought about it. Do you guys buy locally or online?

Investing is not my area at all, so I sat down with a broker where I have an account and told her what I wanted: a dream combo of low risk, growth, and income while protecting capital - and only with socially responsible companies or funds. She did a great job walking me through her thinking and rationales, and answering all my newbie questions - but had me approve all her suggestions. She even asked what social issues I care about - like alcohol, tobacco, and gambling as opposed to big arms dealers, countries with dictators, etc. She found some great mutual funds that do just what I was looking for and often beat the category benchmarks. My portfolio is slightly out of whack with the fixed income allocation. 25% is a bit too low, but maybe I'll ride it out for a while and reap the benefits of this boom.