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Old post from Mauldin:
"Off and on over the years I have written about the distortions that the Dow Jones Industrials creates by using a price-based index rather than a market cap index. As an example, if Microsoft with a market cap of $153 billion went to a price of zero, all the Dow would lose would be 136 points, or less than 2%. If IBM with a market cap of $120 billion went to zero, the Dow would lose over 700 points! But it gets worse. David Kotok forwarded this note to me from our mutual friend Jim Bianco (www.biancoresearch.com), which Jim graciously allowed me to reproduce for your edification (prices quoted below are from a few days ago):
"Comment - The Dow Jones Industrial Average (DJIA) is a price-weighted index. The divisor for the DJIA is 7.964782. That means that every $1 a DJIA stock loses, the index loses 7.96 points, regardless of the company's market capitalization.
"Dow Jones, the keeper of the DJIA, has an unwritten rule that any DJIA stock that gets below $10 gets tossed out. As of last night's close (January 20), The DJIA had the following stocks less than $10 ...
Citi (C) = $2.80
GM (GM) = $3.50
B of A (BAC) = $5.10
Alcoa (AA) = $8.35
"If all four of these stocks went to zero on today's open, the DJIA would lose only 157.3 points.
"The financials in the DJIA are ...
Citi (C) = $2.80
B of A (BAC) = $5.10
Amex (AXP) = 15.60
JP Morgan (JPM) = $18.09
"If every financial stock in the DJIA went to zero on today's open, it would only lose 331.25 points, less than it lost yesterday (332.13 points).
"If you want to add GE into the financial sector, a debatable proposition, then: GE (GE) = $12.93
"If the four financial stocks above and GE opened at zero today, the DJIA would only lose 434.24 points.
"The reason the DJIA is outperforming on the downside is the index committee is not doing it job and replacing sub-$10 stocks, and the financials are so beaten up that they cannot push the index much lower.
"So what is driving the index? The highest-priced stocks:
IBM (IBM) = $81.98
Exxon (XOM) = $76.29
Chevron (CHV) = $68.31
P&G (PG) = $57.34
McDonalds (MCD) = $57.07
J&J (JNJ) = $56.75
3M (MMM) = $53.92
Wal-Mart (WMT) = $50.56
"For instance, if all the sub-$10 stocks listed above, all the financials listed above, and GE opened at zero, the DJIA loses 528.63 points. To repeat if C, BAC, GM, AA, JPM, AXP and GE all open at zero, the DJIA loses 528.63 points.
"If IBM opens at zero, it loses 652.95 points [IBM has risen since then – JM]. So, the DJIA says that IBM has more influence on the index than all the financials, autos, GE, and Alcoa combined.
"The DJIA is not normal as the index committee is not doing their job during this crisis, possibly because to the political fallout of kicking out a Citi or GM. As a result, this index is now severely distorted as it has a tiny weighting in financials and autos."
You could add Microsoft to the list Jim created and not be over where IBM is today in terms of the DJIA index.
Let's look at it another way. A 10% positive move for IBM would move the Dow up by over 60 points. A 10% move by Citigroup would increase the Dow by less than 3 points. Having stocks with low prices clearly prevents the Dow from declining as much as other market-cap-weighted indexes like the S&P 500."
<...he feels that after subtracting unemployable out of the 7.2 he sees a real number of about 4.5......which he doesn't view as critical.>
I'll let my use of the word "exaggerated" stand. If one believes that the "real" number is 4.5 and NOT 7.2 one might be led to believe that there is a bit of an "exaggeration" in that the spread is 60 percent between these two numbers.
I would venture that by 2112, if not sooner, he finds the unemployment rate to be "critical." It is an interesting choice of words, is it not? Perhaps it has to be at "critical mass" for it to be of a concern for him.
We are now resting ON the five-day down-channel line of the SnP.
<Exagerrated? Birth/death rate is currently understating unemployment.>
Yessiree.
<... you could make a case that the statistics create the impression that 7.2% or 13.5% of the households are without a wage earner, which is not the case as it would have been in the 1930's due to the advent of the 2-income household.>
u could also make the argument that you create the same meltdowns today if you lose one wage earner.
<It's likely U-6 extrapolated per household would be more like 8%-10% of households without a wage earner. That's still about 70% lower than the peak of the Great Depression...>
Give it time.<ng>
Coxe's Achilles heel is his take on future unemployment rates.
0.77 at the close.
peepulls are gettin' relaxed.
Donald Coxe's argument is that the unemployment rates are being exaggerated and hence they are NOT crucial in the big picture. He sees the Bear market ending this year.
It's a novel take.
at the top of the six-day SnP down-channel agin.
it's gotta b fryday.
channel it is.
we dropped to the bottom of it at the open:(SnP 810)
trENDING to where is the question
looks like SnP 810 will be the short-term median.
It's New Physicks: at the end of a "black hole" is a rainbow.
coming off of the top of a 5-day 15 minute SnP down-channel.
looks like Februweary should be innereSTING.
meanwhile, aj, a friend's 29 year-old daughter was given a $90K christmas bonus at C.
your tax dollars at work.
obscene.
should find support here at 72 completing an abc from 2:45 yesterday.
Focused on SnP yesterday and forgot to check in on the golden canary. GS is now dancing atop its five day down-channel band. No breakout for it as yet.
2:45 I concede.<g>
No gap, wave 1 maybe.
darvas or darvon <g>
we've been in a four-day down channel on the 5 minute SnP.
in the next 90 minutes we're gonna find out if the bottom came in at 12:30 or if we're gonna break out of the channel at 840.
the october model looks operative
Yup.
An inAWEguration rally is a given. Then a rather severe FEBruweary thru MAYhem decline.
Nice call.
A bounce here to 88 is in order.
GS and SnP at 5/8 retracement of last four days' rise.
<JMHO FXP is a hold here.>
Interesting.
FXP has lost 84% and is in a short-term buy signal here. Five percent more to the down-side and it hits the obligatory year 1973-74 stock retracement.
Short-covering rally.
Right now the Equity p/c is reading "cautious."
Need a .60 for this rise to implode.
A prosperoUS and healthy '09 to all.
A visit to SnP 870 first?
At best we do a sideways abc for mini4 and then a pop for 5.
Preservation of Cash <ng>
<I was told I was overbuilding constantly...>
until a hurricane crosses over and then you realize why a hip roof was the way to go AND then there was the "small" issue of trusses...how many inches off-center did you want them?....
"Lemme make some calls and I'll get back with you...what's a good time to get back with you? Say the earlier part of next...."
C--
The man doesn't talk to "latte liberals." <GG>
--P
BD--
Catch a few for me!!
Happy Holidays.
14 Trillion. That's 2333 light years away. To offset it you need to peg the Ft. Knocks funny stuff at $100,000/ounce.
Scientific notation is numbing.
Happy Holidays, Aj.
Growth in "Production" or growth in "Demand"? If you have both then my thesis of Scarcity is unquestionably wrong. Let us hope I am dead wrong.
Over my work desk is Y.B.'s quote:
"In theory, theory and practice work. In practice they do not."
I'd rather talk to a sorghum grower in Colombia or a wheat grower in India about the third number on a fertilizer bag than a guy running a commodities fund. That's my prejudice.
At the heart of Coxe's model is implied SCARCITY.
I am not understanding Coxe's argument: His thesis regarding commodities, if it proves true, will lead to massive famine and revolt.
I'm also guessing...(allow me to guess!!!) that in 1974 he had less personal wealth than he has now so this may account for why he sees today's economy as a better one. (If I still have my job NOW and I was surplussed from it in 1973, does that mean the economic environment now is better or does seniority have a greater say in the matter?)
There is also the psychological component. When people talk about half-filled and half-empty cups the discussion never focuses on the SIZE of the cup.
In 1980 I sat in my college library and read every issue of the NY Times for 1973-1974. They were on microfiche film. Contrary to what Coxe believes it was different then than now. It was less severe.
No one fractured the cup in 1973. <ng>
Happy Holidays.
50 percent retracement of the December 5-8 rise was completed today.
872.99
thanks.
we're still in the last "b" of abcxabc.
forgive redundancies if others have posted the same.
with 12/8 we began a CHANNEL downtrend. NOT a descending wedge.
SnP 873 looks to be where we are goin'
yesterday was a "b-wave"
we have finished a three day abcxab
starting today: wave c to 873.
The chart has some chilling implications. Correct me if I am wrong, but, it argues for a twenty year decline. Even if we were to climb to DOW 15,000, that would only be a blip on a log scale. Notice how a decade-long stagnation occurs before a decline. That puts us at 2010 before we start heading down in earnest. It fits in nicely with a completion of (declining) Wave A into 2012.
An argument for logs!!
yup
no fear in the equity p/c ratio either, so it may go a LITTLE lower still.
gd mornin'
snp: due for a +30 point bounc
Darvas Land
i wanna see -273 degrees Kelvin!!!
several plausible counts here:
we may have completed from the opening today a wave 1-a-b with a "c" decline to follow; will know in the a.m.
we could also extend the "b" and mess 'round to a 1.382 length.
can u imagine two more years of this #%*^&%!!
that's two thousand Palin articles away <ng>