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Dow 36000: It Keeps Coming Close

Published on: Jun 24 2021

Some of you remember when the book Dow 36,000 was released in 1999.

The subtitle to the book was “The New Strategy For Profiting From The Coming Rise In The Stock Market,” and it was written by James K. Glassman and Kevin A. Hassett. 

The authors had the bad timing to publish their book when the Dow was around 11,000, shortly before the peak of the technology stock boom and the beginning of a multi-year bear market in stocks.

But the book wasn’t about market timing. Its main point was that stocks do so well over the long term that most investors shouldn’t worry about periodic declines. 

Look at a long-term chart of a major stock index (a chart covering at least several decades) and you’ll see that even the worst bear markets don’t look like much over the long term.

The authors argued that stocks are less risky than bonds. They said that once most investors realized this, more would be comfortable holding a higher percentage of stocks in their portfolios for the long term. That would make the valuations of stocks increase and boost their returns.

The authors didn’t pinpoint when the Dow would reach 36,000, other than saying it would be in a few years. 

The Dow finally approached 36,000 recently before retreating. 

One thing the authors got right was that investors eventually would be willing to pay higher valuations for stocks. But they aren’t paying the valuations anticipated in the book. I suspect investors have been willing to pay today’s high valuations because, since 2009, one of the Fed’s goals has been to support stock prices. 

Back in 1999, the Fed also was flooding the economy and markets with money, largely because it was concerned about potential aftershocks of a major currency crisis in Asia and feared the Y2K computer fiasco than many people expected to happen when calendars flipped to the year 2000.

Though it hasn’t hit 36,000 yet and has incurred several bear markets over the last 21 years, the Dow Jones Industrial Average still generated an average annual return of 7.3% from 2000 through 2020. That’s not a bad return for someone who bought and held stocks during the period.

But higher returns could have been achieved by diversifying or by tactically reducing stock allocations when the markets were stretched and increasing stock allocations when markets were down. Plus, the investor wouldn’t have incurred the maximum losses of the bear markets that occurred during the period.

What To Know About Those Extra Medicare Advantage Benefits

Medicare Advantage plans offer a lot of benefits that aren’t available from original Medicare, and some Advantage plans offer benefits that many others don’t. That doesn’t mean they’re a good deal for you. 

The plans that offer the additional benefits often do a lot of advertising through television, radio, mail and other means.

You need to shop carefully before choosing a plan and take a deep look beyond the headlines and big-picture promises. 

Original Medicare doesn’t cover many dental or vision costs, but many Advantage plans do. Yet, the broad phrase “dental and vision coverage” doesn’t mean all your dental and eyecare services will be paid by the plan. 

Most plans require prior approval of the services before they’ll be covered, and the services must be from a provider in the plan’s network.

More importantly, there are likely to be limits on the coverage that are disclosed only in a document called Evidence of Coverage. It’s usually on the plan’s web site. The limits usually are a dollar amount or a number of treatments, such as one eye exam per year.

Most Advantage plans that offer dental and vision benefits have low maximum coverage amounts for the benefits.

Medicare Advantage plans also are allowed to offer benefits for daily maintenance, such as meals, transportation, home aides, bathroom safety devices and more. The benefits aren’t available in original Medicare.

Advantage plans have been allowed to offer these benefits for only a short time. The plans don’t have to offer any of the benefits, and not every Advantage plan does. The plans that offer the benefits usually limit them. Most allow each beneficiary to choose only one such benefit. 

For example, transportation might have limits such as 24 one-way trips in a calendar year from an approved transportation service provider and with trips scheduled at least 48 hours in advance. Also, the transportation might be limited to medical-related trips.

Or a home aide might be limited to no more than four hours a day for a maximum of 30 days a year, with limits to the tasks the workers will do.

The point is that the commercials and other advertising don’t disclose the limits on the additional coverage. Be sure you know the limits before joining a plan.

Incomplete Estate Plans Can Escalate Family Disputes

Most of you have heard of the Boar’s Head brand of meats and other food products. But you probably haven’t heard of the disputes over ownership of the business.

The New York City-based company was founded a couple of generations ago by two men. Each owned half the company for life and passed ownership to his family. The two families still control the company.

The recent death of the daughter of one of the founders led to a dispute between two grandsons of the founders. 

Reports state that shortly before the daughter passed away, she told her son that she’d like a “substantial portion” of her shares to be donated to certain types of charities.

The wish wasn’t expressed in the her will, but her son apparently said he’d abide by it.

That wasn’t good enough for the grandson of the other founder. He filed suit saying that he should receive ownership of the daughter’s shares (in addition to those he already owned) to ensure the last wishes were complied with.

It’s a peculiar argument that isn’t likely to prevail, but it shows that when there’s enough money at stake, there’s likely to be at least one family member, even an extended family member, who will make any argument to seek a share or greater share of the estate.

That’s why it’s critical to have an estate plan that is clear and up to date. If you have wishes about the disposition of the estate, have it clearly stated in a will or trust. 

The Data

Existing home sales declined by 0.9% in May, the fourth straight month of declining sales, according to the National Association of Realtors (NAR). Sales increased 44.6% over 12 months, a sharp rebound from the lows hit during the early months of the pandemic.

The sales decline is due partly to an inadequate inventory of homes for sale and partly to bidding wars, which increase the prices for the homes available. The bidding wars are pricing some potential buyers out of the market.

The median price of existing homes sold increased by 23.6% over 12 months to $350,300. That’s a record high, according to NAR. The median sales price rose above $300,000 for the first time last July.

New home sales declined 5.9% in May from April’s level. They have increased 9.2% over 12 months. 

New unemployment claims increased for the first time in 10 weeks in the latest week. Claims increased by 37,000 to 412,000. 

This was the highest weekly increase in new unemployment claims in four weeks and the largest weekly increase since late March. The increase was caused by higher claims in two states: Pennsylvania and California.

Continuing unemployment claims essentially were unchanged at 3.52 million.

The total number of Americans receiving some form of unemployment compensation benefits declined by more than half a million to 14.83 million. 

The Leading Economic Indicators from The Conference Board increased by 1.3% in May from April. But April’s increase was revised down from 1.6% to 1.3%. 

The Philadelphia Fed Manufacturing Index decreased a little in June to 30.7 from 31.5 in May. The inflation indexes that are part of the manufacturing index were at their highest levels in 40 years. 

The Richmond Fed Manufacturing Index increased to 22 in June from 18 in May. The index’s recent peak was 23 last October. It declined to 15 in March and steadily increased the last three months.

Growth in the services sector slowed in the first half of June, according to the PMI Composite Flash Index. The Services Index declined to 64.8 from 70.1 at the end of May.

The Manufacturing Index increased to 62.6 from 61.5. The Composite Index declined to 63.9 from 68.1 at the end of May.

The Markets

The S&P 500 rose 0.01% for the week ended with Tuesday’s close. The Dow Jones Industrial Average lost 1.01%. The Russell 2000 declined 1.06%. The All-Country World Index (excluding U.S. stocks) fell 1.84%. Emerging market equities dropped 1.54%.

Long-term treasuries rose 1.84% for the week. Investment-grade bonds increased 0.38%. Treasury Inflation-Protected Securities (TIPS) fell 0.12%. High-yield bonds gained 0.15%.

The dollar rose 1.27%. 

Energy-based commodities lost 1.13%. Broader-based commodities fell 2.30%. Gold declined 4.46%.

Bob’s News & Updates

My latest book is Where’s My Money: Secrets to Getting the Most out of Your Social Security. It tells you clearly what your benefit options are in different situations and how to determine the best choice for you. You can find it on amazon.com or Regnery.com

The number of regular viewers for my Retirement Watch Spotlight Series continues to increase. You should sign up because I make in-depth presentations of key retirement finance topics. You can watch these online seminars from the comfort of your home or office at times you choose. To learn more about my new Spotlight Seriesclick here.

A recent five-star review of my book on amazon.com said, “A complete retirement guide! One of the best books on this topic!” Click for more details about the revised edition of “The New Rules of Retirement.” 

If you’re interested in my books, check my amazon.com author’s page

I’m a senior contributor to the Forbes.com blog. You can view my contributor page here

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