Courtesy of Pam Martens.
Corporate media was falling over itself yesterday to report new stock market highs for the Dow Jones Industrial Average. At 2 p.m., this is what the New York Times was reporting as a lead story on its web site:
“Despite everything, the stock market is back at a record high…Since a low point in March 2009, the Dow Jones index has more than doubled, stunning even the most seasoned stock market watchers. ‘What’s amazing about this bull market is that people still don’t think it’s real,’ said Richard Bernstein, chief executive of Richard Bernstein Advisors, a money management firm. ‘We think this could be the biggest bull market of our careers.’ ”
The seductive words in this piece are “record,” “stunning,” and “biggest bull market of our careers.” It’s like subliminal interlineations beckoning one to dip one’s toes into the water, even though we know the piranha are under the lily pads. Which is not to say that it couldn’t be the biggest bull market of Richard Bernstein Advisors’ career – the company is just 4 years old.
Before starting his own firm in 2009, Bernstein worked for Merrill Lynch for two decades, reaching the pinnacle of Chief Investment Officer. Merrill succumbed to its own stunning, bullish bets on subprime debt and was taken over by Bank of America in 2008.
But is it even correct to say the Dow Jones Industrial Average is setting new highs? Were one to adjust the Dow for inflation, there has not only been a lost decade for investors, there’s been a lost 13 years. Adjusted for inflation, the Dow is not even back to its level set in the year 2000. Equally noteworthy, the general public would likely take pause to learn that stocks are nimbly plucked out of the Dow Jones Industrial Average when things go sour for the company. Who are the deciders making these closed door decisions? A big, independent accounting or consulting firm you might be thinking; like the folks who hand over the sealed envelope at the Oscars. No, the stocks are picked by editors at the Wall Street Journal, whose revenue stream comes significantly from corporate advertising.
The 30 stocks in the Dow Jones Industrial Average are not the exact same 30 stocks that were in the index prior to the economic collapse. The losers were plucked out and better prospects inserted. So this is not the pre-2008 Dow Jones Industrial Average setting a new high; it’s the shiny new and improved Dow Jones Industrial Average with some serious warts removed.
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