Dow 14K 2nd time around

The Dow Jones industrial average closed over the 14,000 mark for the first time since October 2007. However, despite a 5.5% increase in home values in 2012, the price for the average home in the US is precisely where it was a decade ago - with no appreciation in home equity at all.

By TERRY KEENAN
Last Updated: 11:16 PM, February 2, 2013
NY Post

Wall Street put on the party hats as the Dow Jones industrial average closed over the 14,000 mark for the first time since October 2007, punctuating the longest winning streak for stocks since 2004.

But before you get giddy, it’s worth taking a closer look at what this means for the pocketbooks of most Americans. Despite a 5.5 percent increase in home values in 2012, according to the Case-Shiller index, the price of the average home in the US is precisely where it was a decade ago — no appreciation in home equity at all. As for blue chip stocks, is it really worth celebrating a milestone that was already crossed more than five years ago? “Happy days are here again” it is probably not.

Yes, the Dow is back to levels first seen in July 2007. That’s a whole lot better than where we were in the spring of 2009, but by almost every other metric important to financial well-being, most Americans are in far worse shape than they were during that sultry summer.

Back then the unemployment rate was 4.7 percent, oil prices were 21 percent lower than they are today, and the biggest headlines coming out of Greece were about a record heat wave.

They were also halcyon days for the chairman of the Federal Reserve, Ben Bernanke. Testifying on Capitol Hill the first time the Dow hit 14K in July 2007, Bernanke needlessly fretted about inflation and assured Congress that subprime losses were in a manageable and now laughable range of $100 billion.

Since that ill-advised testimony, there have been five and a half years and trillions of dollars in money- printing in an attempt to correct Ol’ Ben’s shocking myopia.

And print he will continue to do. As a result, the price of gold is $1,000 higher than where it was in July of 2007, while interest rates as measured by the 10-year Treasury note are three points lower than when the Dow first crossed 14K.

Yes, Dow 14K is certainly a lot better than the Dow 7K. But having been burned badly once, investors will surely be quick to run for cover, if like in 2007, Dow 14K is just a passing fancy.

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