Just Another Number

The Dow Jones Industrial Average has been bumping up against the “11,000” level. While for those who are “long” stocks, the increase means their net worth has been enhanced, but there is still nothing particularly noteworthy about this level. However, investors and observers are riveted on these milestones and accept each as a barometer with predictability that can become self-fulfilling in the short term. This is merely a distraction from a focus on what is important – to consider whether global economic growth will persist. This will lead to rising corporate profitability which ultimately drives common stock prices. Warren Buffett, quoting from his mentor Benjamin Graham, has said, “In the short run, the market is a voting machine but in the long run it is a weighing machine.” We agree with this assessment. We also continue to believe that economic growth will be sustained along with rising profitability.