Numbers games.

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Let's Choose a Better Landmark Than Dow 20,000

Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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Hey, remember Dow 1,000? I don't, really. But I do love this opening paragraph by Vartanig G. Vartan in the August 6, 1972 New York Times:

Dow 1000 is the elusive Everest of the stock market. Craggy and commandeering, its slope icy and its crevices treacherous, this peak has yet to be scaled.

Just over two months later, on November 14, it finally happened. The craggy, icy peak was scaled after years of failed attempts, and the Dow Jones Industrial Average closed above 1,000. The next day it fell back below, the day after that it broke the mark again, and stayed above it for a couple of months. On January 29, 1973, the Dow slid back below 1,000 and mostly stayed there for the next decade. It wasn't until December 1982 that it finally cleared that bar for good.

Let's not forget inflation, which was raging in those days. The dollar lost 57 percent of its purchasing power from 1972 to 1982. In short, the much-anticipated scaling of Dow 1,000 ushered in a really horrible era for stocks.

As Bloomberg Gadfly's Nir Kaissar showed earlier this month, Dow 100 and Dow 10,000 were also both followed by some pretty clunky market performance. Maybe this bodes ill for a market that crossed Dow 20,000 for the first time today. Or maybe it doesn't. If Dow 100, Dow 1,000 and Dow 10,000 were all problematic, it follows -- exponentially -- that it's 100,000 we ought to be worried about, not 20,000.

Indeed, Dow 5,000 was fine (and in the decade after the average first closed above that mark on November 21, 1995, it more than doubled). Dow 15,000 (May 6, 2013) seems to have been OK, too -- so far.

And of course this stuff is all nonsense. The Dow is a flawed measure. It covers only 30 stocks, and it's an average of their prices, not an index weighted by market capitalization or anything reasonable like that. Crossing a big, round Dow number may have some psychological impact, but it's not at all clear what that impact is. Which got me thinking that, since the Dow is flawed, and the impact of round numbers uncertain, maybe we should pick some more interesting landmarks. More to the point, maybe I, as a person with access to a Bloomberg terminal and easy-to-use charting software, should pick some more interesting landmarks.

I'll start with 222, for the early-1970s schoolroom comedy/drama "Room 222." The Dow first crossed that Rubicon on August 17, 1928, which in an amazing coincidence was exactly 11 years, 8 months, and 23 days before "Room 222" creator James L. Brooks was born. Anyway, we all know what happened about a year after August 17, 1928:

The Dow didn't rise above 222 again until 1950. So clearly that wasn't a good omen.

Speaking of omens, what about 666, the number of the beast from the Book of Revelation? The Dow scaled that fiery peak on July 27, 1959. The next decade was ... not too bad.

Surely we could come up with something more scientific, though. For example: pi. The Dow never hit 3.14 -- it was 40.94 when it was first published on May 26, 1896. But on December 30, 1991, it did for the first time blast through 3,141.59. The ensuing decade was pretty stinking awesome:

Clearly, mathematical constants are important market signals. They're not always good news: Dow 314.16, as you can sort of tell from the Dow 222 chart, entered the scene in January 1929 and ushered in a disastrous decade. But definitely let's all remember to pay attention when the Dow passes 27,182.8 (Euler's number times 10,000) and of course Dow 31,415.93.

Signs of the devil seem to be worth looking out for, too, although I'm afraid I'm not aware of any numerical ones other than 666. (Also, people are saying that 666 might have been a bad transcription and it was really supposed to be 616, although that wouldn't affect my chart much.)

The most crucial lesson for investors here, though, seems to be that one should keep an eye on the expansive oeuvre of James L. Brooks, who was also co-creator of the "Mary Tyler Moore Show" (whose eponymous star died today, the very day the Dow first crossed 20,000) and Matt Groening's longtime collaborator on "The Simpsons." Just think of all the numbers and other hints to the market's future direction just waiting to be mined from "Simpsons" episodes. After you're done celebrating Dow 20,000 and mourning Mary, you should probably go watch a few.

  1. I was 8 years old, and my newspaper reading was confined to the San Francisco Chronicle sports section and Art Hoppe's column. We did watch Walter Cronkite almost every evening, and he surely would have mentioned this. But it apparently did not resonate.

  2. From his 1988 obituary: "A short, dapper, cheerful man who kept his largely bald head shaven much of the time, Mr. Vartan was widely known, on Wall Street and elsewhere, by the nickname Tonny."

  3. The Dow had first closed above 900 in 1965.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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Justin Fox at

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