The Dow Jones Industrial Average (DOW industrials) recently hit an “all time high.” While it is nice to read these types of stories from Wall Street, what does it really mean?
This recent “all time high” refers to the DOW industrials surpassing its closing value in 1999. This means that an investor who invested at the end of the year in 1999 who invested in the thirty large cap company stocks that make up the DOW industrials would have made up for his or her loss over the past seven year period.
It is always nice to make up for lost profits, but there are other factors at work here. Specifically, the cost of living (inflation) has increased by over twenty percent in the past seven years. Therefore, the above cited investor would have to make an additional twenty percent profit in order to break even with his 1999 DOW industrials investment.
The mainstream media seems to have overlooked the significance of this issue. An “all time high” makes headlines, but it is not the whole story.