The Ignorant Investor

NEW YORK - The Dow Jones industrial average crossed 11,000 Monday for the first time since before the 9/11 terrorist attacks, buoyed by a rally that has sent stock prices soaring through the first five sessions of 2006.

Wall Street's best known stock indicator reached 11,003.50 shortly after 1 p.m. EST, the first time since June 13, 2001, that the index of 30 blue chip stocks traded above that milestone. It last closed above 11,000 on June 7, 2001, when it stood at 11,090.74.

Hey, what can I say? A while back I remember predicting a 10% drop in the S&P and the Dow for right about now, but I told you my predictions have a way of going awry. I can't spot the reason for all this sudden love going out to stocks in the opening days of 2006, but apparently everyone came back from the New Year feeling upbeat.

Yes, there's humiliation making the wrong call. But the pain of humiliation is mitigated by the pleasure of watching the value of my portfolio go up. Go little Dow, says I, make a run for it. Me love you long time. And so forth.

I'm still bleak on the prospects for 2006, if only because a lot of sources of cash in the economy seem to be drying up- home equity probably isn't rising as fast as it once did and so can't be cashed out, interest rates aren't falling so we won't see as many refinancings, taxes are going to have to go up to cover the deficit, energy costs are higher. The word on the street is that high consumer spending isn't needed now to keep the economy growing because capital spending by businesses is about to skyrocket, but I don't find this argument compelling. Businesses add capacity when they expect strong demand, and demand for U.S. goods and services seems to be topping out rather than getting ready to leap to new levels. Maybe we chug along like this for a while, with only a slight slowing in GDP growth.

I'm kind of giggling at myself here, because I'm predicting the future even after saying many times DON'T PREDICT THE FUTURE. I can't resist, though. Weakness surrounds me like a big foggy cloud.

Still working on my plan for the year. Right now I'm considering going about 40% in short to intermediate bonds or cash, 50% equities, and 10% gold. Equities would be split between domestic and foreign stocks. That sounds very businesslike and reasonable, doesn't it? Nothing earth shattering or risky. Dull as watching grass grow. Which, as Paul Samuelson likes to say, is the way investing should be.