Wednesday, August 27, 2008

Dow gets an "F"

Getting it out of the way up front, I am no economist and I only possess a basic knowledge of statistics. This does not stop me from thinking that this is a scary chart of earnings for the Dow Jones Industrial Average. I found it in a chat room and all of the attributions are listed at the bottom of this post.

What is this? It is a chart of Dow earnings since 1929 - raw, not normalized per share or per anything else. We would expect a nice rising trend with wiggles as the likes of Alcoa and McDonald's earn more money over time.

But even a statistical chowderhead like me can tell that the current reading - IF TRUE - is well outside of normal distributions. If your Grandma is invested solely in the bluest of blue chip DJIA she experienced earnings reserved for a biotech company that just failed its last hope of an FDA drug approval trial.

That cannot be a good thing for the stock market.

Here is the link to the full article by Casey Research:
http://caseyresearch.com/displayCcs.php?e=true

It looks like it used data from Barron's and was brought to the attention of the chat room by a trader named William. That's all I can pick out from his email address and I am sure he does not want his email address posted here. William, if you read this, please comment and let the world know who you are - if you like, of course.

10 comments:

doug said...

great job mike

Anonymous said...

You made me famous...thank you Mike,

Regards,

William
a.k.a. William "Bill" Clinton

Anonymous said...

Mike:

I forgot to say....if you ever need an opinion or rec on Cattle futures, let me know....Hillary and I have an excellent broker.

Best wishes,

Bill Clinton

Anonymous said...

Mike gets an F for grammar.

Anonymous said...

Michael, what do we have today? A head fake from traders that don't realize that the 3.3% revision is backward looking (to a time with $100B Federal stimulus)? In light of your graph and 4Q earnings estimates being revised lower daily, you wouldn't think the bear rally would keep going.

Who says the markets are forward looking?

doug said...

I'm with you on this one anonymous I've been the proud owner of some puts for about 1 week now and I keep waiting for the bottom to fall out. monday I thought was the start, but no, it just won't lay down....I think tomorrow is gonna be ugly for the bulls.

Anonymous said...

You write for Barrons but you couldn't even get the spelling in your heading correct; yet you grade something an "F" ? Look in the mirror.

doug said...

when someone pours over charts with bloodshot eyes and also gives us his expert analysis on this blog free of charge, he can spell things however he wishes in my opinion....

Anonymous said...

I agree Doug. When did this become the grammar blog? I thought this was a forum to discuss technical analysis and the markets. Let's keep our comments on track.

Quick Takes Pro said...

Every day in late August is a head fake. Gustav is heading straight for N'awlins and the oil rigs but crude fell - because demand for energy from a weak economy will fall? Or because the economy was better than they though last quarter?

I have not offered any trades to subscribers all week for this very reason. Lack of liquidity exaggerates every move as there is no buffer of "the public" to slow it down or arb it away.