Friday, February 20, 2009

What is the correct value for the DOW today?

The DOW closed at a 6 year low today. I wonder, what is the "proper" value for the dow.

Look at the full history:

I drew a green line representing the average value over the years. It seems that 10000 is right.

Wait, that is a logarithmic scale. What about a linear scale? Here it is with the same green line.

Looking at this the "right" value today is only just over 2000. That is a scary number.

How low do you think it will get?

From Aug. 1929 to July 1932, the DOW went from 377 to 41, down about 9 times. In Oct. 2007 the DOW was at 14093, 9 times lower puts the DOW at 1566.

Could it go that low?

I don't know. What do you think?