Dow Record High … Don’t Believe the Hype

The big headline a few weeks ago was the record high hit by the Dow Jones average. Of course what you didn’t read or hear at the time was that the ratio of declining to advancing shares was 1800 to 1300. In other words, even as the Dow was hitting its stride the market was giving way beneath investors’ feet. How should an investor interpret mixed messages like that? The answer may lie in the events buried on page 30 of the Wall Street Journal a day before the historic high; you see, China had delayed the release of Q1 economic statistics and that did not portend well. Of course followers of sino-economics were not surprised at all. China had been overheating for decades and inflation was always on the horizon. Now the Chinese faced the inevitable need to raise interest rates and hike bank reserves.

China delayed the release of economic statistics until after markets closed … this was no surprise as the economy had been overheating for decades and inflation had been a rising specter.

Though the Chinese government didn’t report its news until after the close of trading, its market was already down 4.5% based on leaks and rumors. It will be interesting to see how China fares now that global markets are fall into sharp decline lead by Europe and the U.S. As dear old dad once said, “watch what people do not what they say,” and since there is a buyer for every share of stock sold, the question is not whether there will be a loser in this global poker game but rather who that loser will be. As it turns out, the answer may lie in the next day’s activity. We’ll be watching and waiting.

About the Guest Author: Mazyar Hedayat is the President and principal Attorney at M. Hedayat & Associates, P.C. He is also the President of Aegis Title Services, Inc. Mazy has held Series 63 and 7 licenses, and has been a licensed business broker. He works with small businesses from inception to sale, and with small business owners as well. He has also written about small and medium-sized businesses throughout his career. Feel free to contact him at 630.378.2200 or by e-mail at mmhedayat1@gmail.com.

  • the higher the dow jones goes, the more fragile is the index of diving should any small indicator worldwide triggers – such a oil price climb in nigeria or middle east … or even a china interest rate hike will be used as an excuse to selloff …