Dow Jones Average Passes 12,000 Level for First Time
July 7, 2008 - 7:23 PM
(CNSNews.com) - The Dow Jones Industrial Average surpassed the 12,000 mark for the first time on Wednesday, causing one GOP leader to declare that "Republican economic policies of tax relief work" even though some analysts claimed the record high is dangerously overrated.
"Today's record-setting stock market rally is proof that Republican economic policies of tax relief work," said House Speaker Dennis Hastert in a news release after the index of 30 big-name stocks reached 12,049.51 just after trading began Wednesday morning.
Although the Dow Jones average later retreated below the 12,000 level, the Illinois Republican still found good news in the fact that the index had set closing records seven times during the past two weeks.
"In addition to the stock market's record-setting growth, the federal deficit is on track to be cut in half three years ahead of schedule; gasoline prices continue to fall; more people are working today than ever before, and unemployment is at a record low of 4.6 percent," Hastert noted.
Also, "consumer prices, helped by big declines in the price of gasoline and other energy products, fell in September by 0.5 percent, the largest amount in 10 months," Hastert noted.
Other economic news on Wednesday included a Commerce Department report stating that housing starts rebounded in September from a three-year low the month before, rising an unexpected 5.9 percent.
However, Justice Litle, editor of the Outstanding Investments newsletter, noted that "the 12,000 mark has very little to do with the real status of the market."
"Even though the Dow just hit a 'new high,' more than 70 percent of the stocks that compose it are truly under water," Litle said in the Daily Reckoning, a free online newsletter.
Up to 70 percent of stocks are at least 20 percent below their respective all-time highs, and more than half are at least 30 percent below record levels, Litle added. In fact, recent performances of only a few bright spots, such as Exxon Mobil, have misdirected the mainstream's attention from the Dow's "remarkably dismal growth."
"Most investors also forget that the U.S. dollar has given up significant ground in the past 10 years," Litle said, "and that gauging the growth of the Dow in dollars is like measuring with a rubber yardstick."
Kevin Kerr, former commodities broker and editor of Resource Trader Alert, shared a similar sentiment.
"The irrational excitement about Dow 12,000 is a yawn for me," said Kerr. "There are lots of great trades and investments to be made, and few of them have anything to do with the Dow hitting 12,000."
However, for many investors, the Dow's surge has suggested a bullish scenario for future U.S. economic growth. Coupled with the latest release of the Federal Reserve's Beige Book, which predicted moderate economic expansion and a soft landing for recent busts, the mainstream outlook is brighter than usual.
"As we make new highs on the Dow, people start to dream again," said Chris Mayer, editor of Capital & Crisis, a financial newsletter that focuses on long-term, contrarian investments.
The Dow Jones average has "been going up in small, non-spectacular steps, which means it's a much healthier market," Hugh Johnson, chairman of the asset management company Johnson Illington Advisors, told CNN. "We saw big steps in 1999. It's doing just fine."
Nevertheless, Hastert warned that recent economic progress could be affected by the outcome of the Nov. 7 mid-term election, which will take place in 20 days.
"If Democrats had their way, they would erase stock market gains by raising taxes and stalling the economy, destroying job growth and putting leaders in place that are in favor of tax increases," Hastert said.
"In fact, if the Democrat majority blocked our efforts at making tax relief permanent, [House Minority Leader] Nancy Pelosi and the leadership would raise taxes on hard-working American families with two children by at least $2,000," Hastert noted.
"Our nation deserves to enjoy a booming stock market and a thriving economy, and it deserves leaders that work to put more money back in the hands of hard-working Americans," Hastert added.
See Earlier Stories:
Taxpayers, Pelosi Differ on Outlook for Fiscal Responsibility (Oct. 16, 2006)
Positive Jobs Numbers Show Need for Change, Pelosi Says (Oct. 6, 2006)
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