Dow 13,000 Lucky?

So the Dow Jones Industrial Average has finally reached 13,000. Hip, hip, hoorah!

Myself, I'm of two minds. As a signifying of the national mood, especially the mood of those who have a lot of money, it's a good sign. It seems to show that despite the various economic worries that we have (the War on Terrorism, the decline of the dollar, the rising price of oil, the growing trade deficit, the rise of subprime mortgages, the overall huge consumer debt, the huge business debt etc etc etc), the smart people with lots of money think we'll over the problems.

On the other hand, I think more logically than most people. Warren Buffett is the only other investment writer I know of to point out that stock buyers should want the price of the stocks they are buying to remain low. Really, if you're buying some stock or stocks on a regular basis to save for your retirement, you ideally want the prices to remain low -- until you sell them.

That's because the lower the price of the stock, the more shares you can buy with the money you have.

Let's say you're spending $100 a month to buy a company's stock, and right now the market price is $25. You can buy 4 shares. Let's say that by next month the price has doubled to $50. Yes, you feel good because the value of the shares you've already bought has doubled -- but now your $100 can buy only 2 new shares instead of 4.

For accumulating stock, you want the price to remain low.

But few people look at it that way -- they'd rather be happy that the shares they already own have doubled in value, although they can't do anything with them.



Dow 13000
Dow 13000