The Wide Angle – January 22, 2008

Last month, in the Corporate Americana series, the performance of the Dow Jones Average was mapped out in relation to the Presidents of the USA on the basis that this served as a reasonable proxy to measure the country’s collective confidence and economic outlook under each Administration. Each President was then ranked from the best stock market performance as measured by the Dow (Calvin Coolidge was #1, up 247%) to the worst (Hoover, down 80%).

At the time this table was prepared (December 7th), George Bush ranked # 11 with the Dow up 29% since his inauguration on January 20, 2001 to 13625. The reason for using the Dow Average on the barometer for the political economy was that it is the longest running index available, created in 1897 by Charles Dow and Ed Jones. Updating that table to Friday’s Dow’s close, at 12099, has reduced the gain since inauguration to 14%, and bumping Bush down to # 13.

 

 

We posed the question to our readers whether such a performance valuation for Bush was consistent with economic reality — that a flattish assessment, á la Jimmy Carter, down 1%, might not be a more realistic expectation. That would mean a drop in the Dow of another 3000 points.

We further postulated what the Dow would be, using the performance benchmarks of some other past Presidents, such as Nixon and Hoover. Updating this to the Dow’s closing last Friday, January 18th, here is the forecast ~

A President Carter Performance Valuation, down 1% from the Dow Average when Bush was inaugurated means a Dow closing at 10474, or down another 1625 points from here by January 20, 2009;
A President Nixon Performance Valuation, down 26%…Dow at 7829 or down another 2751 from here by January 20, 2009;
A President Hoover Performance Valuation, down 80%…Dow at 2116 or down another 8464 points from here by January 20, 2009.

While there are indeed some equities that still warrant investors’ attention — and two are mentioned in today’s edition of Ronin’s Daily Views, IF you can overlook the rhetoric from the media and the government, and recognize the stock market may be headed lower, you might be doing your portfolio a favor.

Consider the selling of the Diamond Trust (stock symbol DIA, last Friday’s closing: $120.57). This is a trust that represents about 1% of the Dow Jones Average. It is in near-perfect correlation to the price movements of the Dow Average. Here’s the graph.

 

 

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