Disclaimer: We are especially states that our blogger has no financial liability whatsoever to any user on account of the use of information. Using the Dow’s dividends one could make a case for 1,000 on the Dow Jones: a 95% market crash, larger than the market decline the Dow suffered in July 1932. A 75% reduction in current cash payouts (similar to the decline in dividends the Dow saw from 1929 to 1933) would take us to the $100 line in the table below. With the current Dow Jones yield of 2.29%, this alone would take the Dow Jones down to just above 5000, some 1500 points below its March 2009 bottom. But historically, all significant Dow Jones market declines have also seen its dividend yield rise. Here is a chart plotting every daily move of +/- 2% or greater since January 1900.
In July 1932 the Dow Jones was yielding over 10%, and a 10% yield with $100 in cash payout prices the Dow Jones at exactly 1000. In March 2009, with all the lingering problems of the mortgage bust still burdening the global banking system, I expected gold to reach $16,000 before the Dow Jones ever did. No one knows, but if you want to get a clear picture of the declines in the Dow Jones, it’s best to look at the Dow like Mr Bear does; with the Bear’s Eye View (BEV).
As long as the financial markets continue to advance, central banks can maintain the appearance of market stability.” However we live in a world wallowing in unserviceable debt, created by these same central banks. A BEV plot negates the effects of one hundred and two years of inflation from the Dow Jones’ valuation by converting each new all-time high into a Zero percent.
However since its March 2009 bottom the Dow Jones has only advanced, but that will soon change simply because market also go down, as the Dow has many times since 1885. I see the recent gains in the Dow (since March 2009) as an indication of the success the central banks have had forcing their inflation to flow toward critical markets to maintain prescribed valuations. In the chart they appear to be regular market events, but that’s not exactly true.
When this policy” begins to falter, we’ll be able to detect it by noting when the Dow Jones once again begins to see what I call 2% days, days where the Dow Jones closes more than 2% up or down from the previous day’s closing price. Of the 31,264 trading sessions at the NYSE since January 1900, only 1,795 of them have seen a Dow Jones move of 2% or more from a previous day’s closing price. Curiously, the largest positive daily moves in the Dow Jones have been during the worst market declines.