Let's say in the 13th century during Mongol invasions of Europe-if you want to escape the Horde retreated behind thick walls, writes Dan daning for daily Reckoning Australia. But at the moment I can only copy the Chinese and Europeans the right mix of saltpeter, sulfur, coal, they started blasting each other's walls. This eventually led to the emergence of the nation-State as we know it about 1688.
We take you on a tour of one paragraph of 500 years of European history because it bears directly on the Dow Jones Industrials finally closed above the 15,000 level. Woo Leonardo Jerusalem! A hand for Dow, please. Just like the poor helpless in Europe fled behind the walls of castles, so also they invest today to withdraw into the only liquid, apparently safe stocks they can find. Today's investors are trying to escape the fighters mounted the deadliest in the history of the world. Are you running away and adhesion of the modern world: Central Bank intervention aimed at the value of everything. The following chart demonstrates the point.
Source: StockCharts
You should know by now that the Dow is primarily a marketing tool used by Wall Street to promote the idea of stocks for the long run. Like an index, is almost completely meaningless. It communicates almost no useful information. But the never-ending search from daily news flow, we believe we have been pressed at least one useful insight from all the mess of the above lines: blue chip shares are dense in US dollars can go much further.
Now hold on. Before you accuse us of making ridiculously stupid statement, let us take you through the chart. The pink line shows 16.43% Dow last year. Although this is pretty good for a period of 12 months, you can see almost any space that has come since November. This is an important detail, we come back to it later.
The Dow is a price-weighted index. And that's what makes it particularly useless. Is a more expensive, more weight it has indexed. In other words, the Dow shares more because their price is higher. It seems to defy the old axiom that price is what you pay, value is what you get.
But what some people already paying? Chart showing Dow index four members currently have stock prices beyond 100 dollars. If our understanding is correct, these 4 stocks exerted the greatest influence on the progress of the index. Shares of 3 m are four Corporation (NYSE: MMM), McDonald's Corporation (NYSE: MCD), Chevron Corp. (NYSE: CVX), international business machines (NYSE: IBM).
In terms of performance, IBM ????????'? have been laggards group over the past year. 3 m and Chevron, meanwhile, led the pack. To be honest, Chevron's performance is a bit awkward. Slow growth with world oil prices steady, not make a bet large at big oil.
But oil companies are also like nation-States. They operate around the world. And there is always the possibility of another war in the Middle East. And it would make a company like Chevron as proxies for geopolitical stability. What about the rest?
3 m is a combination of your being. When you look at its operating divisions, it's hard to find something that the company does not manufacture. The sections include Industrials, transportation, health, consumer and Office, display, security, defense, and electronics and communications.
It really is like a small economy, with workers apparently in shares as currency. Our analysis of the ' big picture ', a conglomerate like 3 m has a greater chance of survival than a lot of deflationary depression modern nation-States. That is not often won't be hard. But you will get 3 m by better than, say, Spain?
What is bad for anyone who has already been reached by the Dow's tech stocks that don't really join the party yet. Big gains in the Dow and S and P & reached the consumer staples and financials stocks and high yield. Now is the point at which the General Assembly could be self-fulfilling.
That is because Dow is a weighted index, high prices tend to lead to higher prices. Wise savers in those who look at the economy and realize the growth sucks hard to find do not jump into the rally. Cash from the side will expand at these blue chips which may have missed out so far.
All this is speculative tail chasing. But that's what you get when the value of the currency weakened sappers systematically central banks. And it makes particular sense in terms of liquidity pyramid John Exter. Capital on the run from a dangerous system peripheral assets to finance tangible assets less risky or more core.
There is an aspect of pragmatism to this kind of speculation. You have to do something with your money in low interest rate. It seems like more and more investors are taking the path of resistance, barmo from blue chip stocks into delicacies, perhaps at the expense of AAA rated bonds (look out Australia).
Formerly editor of strategic investments with Lord William Rees-Mogg, Dan daning is an independent investment analyst now based in Melbourne, from where it editing the Australian edition of the daily Reckoning. He is also the author of the best-selling the bull Hunter (Wiley &-boys).