The Dow Jones: Celebrating 10 years at 10,000!

Past returns are no indicator of future success. This one sentiment is the rationale for future-focused thinking, especially for countries and companies that have achieved prosperity and greatness. The cleverness of our forebears will not guarantee future returns, financial, cultural, social or otherwise.

Which brings me to a discuss of the stock market of the future. The Dow Jones just celebrated ten years hovering around 10,000. Some doomsday types are predicting a potential fall to 1,000, some are more sanguine, and the world’s pension funds appear to expecting a long boom.

Back in 2008, when everything was up for debate, I remember the violent reaction many Americans had to the notion that the stock market might not rebound. I recall floating this idea back when the banks fell over, and I people acted as if I had insulted their mother, slapped Santa Claus, and kicked a puppy. Of course the Dow will come back. Don’t you know that since the Great Depression it has always been a good investment? This means it will be a good investment in the future. To suggest otherwise is a mix of ignorance and intentional blasphemy.

2010 marks an important anniversary – the Dow Jones Industrial Average has remained at 10,000 for ten full years. If you only take the last ten years, your savings account was a better investment than stocks. You could make money trading stocks, but it is increasingly clear that the only people doing this effectively have football field-sized computers for high-frequency trading and a phalanx of astrophysicists providing the mathematical formulas.

What will stocks do in the future? That’s not really the issue here. Start by accepting the notion that past returns are no guarantee of future performance. And then, keep thinking.