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Sloan Sessions: What’s behind market rally?

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SCOTT JAGOW: Despite a drop on Friday, the Dow is still within striking distance of its all-time closing high. That was set back in January of 2000. There’s been a lot of talk about this record, but Newsweek’s Allan Sloan is rather unimpressed.

ALLAN SLOAN: Its significance, if it has any, is psychological, because when you say ‘how is the market doing?’ everybody tells you about the Dow even though I know the Dow really doesn’t mean anything. The real thing that means something is the Standard & Poor’s 500. The Dow is a much narrower thing than the S&P and it’s only 30 stocks so the S&P has more significance. The last time I looked it was 12 percent below its all-time high, which it reached in March of 2000.

JAGOW: It’s not just that people are looking at the Dow instead of the S&P 500, but even with the Dow, nobody seems to be talking about the inflation factor.

SLOAN: The Dow is now what it was six and a half years ago, but that was six and a half years ago, which means A) you’ve been sitting around with what we ungraciously call dead money for six and a half years. B) A dollar is worth less now than it was six and a half years ago and C0 if stocks had continued to rise at their historic rate for the last six and a half years, the Dow, which is now around 12,000, would be over 18,000.

JAGOW: One of the reasons that we’re talking about this is that September was a pretty good month for Wall Street and it usually is not. What’s been going on, you think?

SLOAN: I don’t think it really means anything except that things are going up. A lot of what goes on on Wall Street and all of these markets is momentum and when things go up, all sorts of people pile on and run them up higher. All sorts of speculators and the hedge funds and various [layers so I’m very wary. And when you ask what are, you know, sort of normal questions that normal people answer in a normal way, I’m uncharacteristically modest.

JAGOW: OK Allan, if you can’t give me the lowdown on stocks, how ’bout the bond market?

SLOAN: Well I’ll give you the same answer: It depends. Right now there’s a very strange thing going on, which is I can get more on my money market fund, which is around 5 percent, than I can owning long-term Treasury securities, which are around 4.7 percent and this doesn’t happen very often. For me, since I’m old and skeptical, I’m going to stay, at least for now, in money market funds but if we come back and revisit this in a year and money funds are down to 3.5 percent and bonds are still hanging in at 4.7, remember to whack me and tell me that I was wrong.

JAGOW: Oh I’ll write it down. Alright Allan thanks a lot.

SLOAN: My pleasure Scott.

JAGOW: Allan Sloan is the Wall Street editor for Newsweek magazine. In Los Angeles, I’m Scott Jagow. Thanks for listening and have a great Monday.

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