Dow 5000, Pessimistic only about goverment policy

BNN, January 22, 2015: click to watch


Libelled by Barry Ritholtz (@ritholtz)?

Market Forecasts to Ignore in 2015 by Barry Ritholtz

January 5, 2015 

There have been so many erroneous calls for a stock-market crash that it's hard to choose which deserves special mention. But I am going to give you two that merit attention: The first comes from Chapman University professor Terry Burnham, who predicted Dow 5,000 before Dow 20,000.

During the years he [Terry Burnham] has repeated this forecast, the market has gained about 40 percent. Read Barry Ritholtz's full article:

My Response: 

Mr. Ritholtz's math is either wrong or deceptive. 

I published the Dow 5,000 article after the market closed on July 11, 2013. Read my Dow 5000 full article:

The historical levels of the Dow can be found in many places. Perhaps the easiest is google finance. Click on the "Dow Jones" below the graph, the select 'historical prices' on the upper left. 

Value of the Dow when I made the Dow 5,000 prediction (close on July 11, 2013): 15,460
Value of the Dow when Barry Ritzhold wrote his article (close on January 2, 2015): 17,833

% change in Dow since I made my Dow 5,000 prediction [Current level - old level)/ old level]

= (17,833 - 15,460)/15,460 = 15.4%

So the Dow had risen 15.4% between my prediction and Mr. Ritzhold's article (before yesterday's 331 point decline). 

Barry Ritzhold writes, "During the years he has repeated this forecast, the market has gained about 40 percent.

Is this libel to write 40 percent when the actual figure is 15.4%? I don't think so because Mr. Ritzhold's statement is technically true in that the cumulative return over 2013 and 2014 is about 40%. It is also true that, "During the century he [Terry Burnham] has repeated this forecast the market has gained about 40 million percent."  

I want to point out two positives about Mr. Ritholtz's article. First, he spelled my name correctly. Second, he does point out that my prediction is neither wrong nor right because it is specifically formulated as Dow 5,000 before Dow 20,000. At Dow 20,000 I will not make any excuses. I will be wrong. Conversely, if I am right, I will be sorry that we live in a world with so many macroeconomic policy mistakes. 


Stealth QE & More Monetary Mischief

(c) Terry Burnham

Oct. 29, 2014 marked the end of the Federal Reserve’s historic program of quantitative easing, or QE, which created more new money in the past six years than in the entire history of the Republic. Easy-money has caused the U.S. stock market to soar. Beginning in December of last year, the Fed gradually retreated from its monetary generosity by tapering its purchases of Treasury and mortgage bonds to the point that quantitative easing is, at long last, now over.

The preceding paragraph reflects the conventional wisdom; the global financial media have printed hundreds of similar paragraphs over the last few months.

However, the conventional wisdom contains one false statement, one misleading statement, and one myth:

What’s false? QE is over.

And what’s misleading? The monetary tightening of the QE “taper’ was gradual and has ended.

And the myth? QE causes the stock market to rise.


Is Printing Money a Free Lunch?

"US set for lowest budget deficit since 2008" read a recent CBS headline.

This year’s U.S. budget deficit is estimated to be $506 billionWhile this is a large amount in
absolute terms it is much smaller than deficits in recent years. This relative dearth of red ink has led Paul Krugman to crow, “Bad news for Dr. Evil fans: the days of a ONE TRILLION DOLLAR deficit are over. In fact, the deficit is falling fast.”


The Real Financial Monster: Low Interest Rates

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Financial markets live in terror of the day the Federal Reserve raises interest rates. However, we should fear exactly the opposite: a persistent nightmare of low interest rates. Chronically low interest rates signal trouble, and they inflict financial pain. Ominously, a recent economic poll (interpreted correctly) suggests that interest rates are going to fall, not rise. 


Happy Birthday Dow 5,000 Prediction

© Terry Burnham

On July 11, 2013, on this page, I predicted that the Dow Jones Industrial Average would hit 5,000 before it hit 20,000. Here is some of what I wrote a year ago:
The Fed has been keeping interest rates at rock bottom lows to supposedly stimulate the economy… The idea that the Fed can save the economy is simply ridiculous. … What about fiscal policy? Can we deficit spend our way to prosperity? This is also ridiculous. Our problem is that we have overspent. If you had a problem of drinking 50 cups of coffee a day, would the solution be to drink 80 cups a day for a while? … 
Stocks will decline … I’m not predicting what will happen today, or in the next week or month. I don’t pretend to know the timing. I only think that I see the inevitable.
One year later, we revisit the macroeconomic policies and the impact on jobs and profits, and check in on the Dow Jones Industrial Average. In addition, we develop a scorecard to revisit periodically as the government attempts to end the unusual macroeconomic policy environment.


The 5 Critical Mistakes College Students Make

What are these students doing right?

The 5 Critical Mistakes College Students Make

Two students email a professor asking for help getting a job. The professor says yes to a student with bad grades, and no to the student with straight A's. Why?
There are secret rules to academic life. Students who know the rules win, others lose. These rules are invisible to most students, and there is no college course that explains the hidden paths to success.