by Mark Scheinbaum
American Reporter Correspondent
Boca Raton, Fla.
October 6, 2006
THE NEW OLD DOW
BOCA RATON, Fla. -- Hats off to the Down Jones Industrial Average for reaching "new heights" - at just about where it was almost seven years ago.
The non-representative list of large companies has been dead in the water since early in the year 2000, but the pendulum has now swung past neutral and is moving into the plus column. Today it reached its highest level ever, closing at a new all-time high of 11,866.69 - the third such high in the past three days.
Ironically, this anachronistic measurement of equity markets could actual signal one of those rare investment moments when opportunity knocks, even for investment amateurs. Erasing seven miserable years provides a chance to reorganize a portfolio and reexamine long term and rather conservative investment goals.
There is plenty of evidence that interest rates might stay relatively low while the blue-chip equity market starts a new bull leg over the next year or two.
As a consumer, a voter, an observer, and an investor, think of the types of industries which will be needed for this next economic cycle. If housing sucked up concrete, copper, lumber, and financing for the past decade, isn't it time for infrastructure to step up to the plate?
How many roads have you seen with crumbling shoulders and deepening potholes recently? How many bridges and overpasses look like they are ready to crumble? Perhaps most telling are the projects which take five years to complete that present us with another four or six lanes on the Interstate. The hour the ribbon is cut and the politicians retire for a drink at the bar, the roads are jammed and drivers begin demanding another four lanes.
Companies such as Caterpillar will continue to sell heavy equipment even if oil prices go up once again. Computer, air conditioning, electronic control, and environmental systems firms will ride the next wave of U.S. expansion in construction and engineering, if for no other reasons than America is playing "catch up" with public works projects that needed fixing 20 years ago.
Think about investing in dull companies which have the curious habit of paying dividends for years or decades and have a knack for making money. Can restaurants expand, disposable income boom, and stay-at-home gourmets prosper without more expensive and more exotic products from McCormick spices?
I doubt it.
Will working moms en route home with the screaming kids after school and work, stop in McDonald's fewer times now that they can also buy a pretty nice salad, chicken and a cappuccino?
As jet fuel prices drop, will the world class commodity (gas) hedging team on the trading desk at Southwest Airlines start losing money. I don't think so. Consider a mix of investment grade equities, A rated corporate bonds or better, and even government or government agency bonds.
Smart people have lost money even with quality portfolios. It's just that they are less likely to consistently get clobbered, and they are piggy backing big institutional choices that tend to be a self-fulfilling Bull Market prophecy.
So, enjoy the record Dow, but remember while it snoozed for seven years you survived to invest another day. Today might be that day.