The Stupidest Reason In The World To Sell Your Stocks

dow headlines

Photo: BusinessWeek

Many commentators are freaking out about a new Barron’s headline celebrating the arrival (actually return) of the Dow Jones Industrial Average passing 14,000.We’ll refrain from singling any one out.

But the belief is that the following from Barron’s means the market is about to tank: “We told you so. In October, we predicted the Dow would pass its 14,165 record by early this year. Now we’re just 1% short. Expect a breakthrough soon. Here’s what happens after that.”

More generally, there are people who get nervous any time there’s an article talks about a new bull market, or how everyone’s into stocks, or how we’ve just breached a new era.

Basically, there are a lot of people who reflexively get negative, just because people have turned bearish.

As Josh Brown has noted, this so-called “headline” or “magazine cover” risk is total nonsense. A magazine cover is just a magazine cover. A headline is just a headline. A big benchmark is just a big benchmark.

We went through the history of the Dow, from the 1960s to today, to prove why this is complete hogwash.

(Many thanks to Barry Ritholtz and, again, Josh Brown for digging up some of the “deader” of the dead trees…)

For the sake of this feature, we can trace the first headline risk debunking to the May 31, 1963 issue of Time. It talked about a rising US economy.

Ok, stocks declined for about two months after that. Then they went up for a good while.

The Dow hit 1,000 for the first time in November 1972.

It's true that it would take nearly two decades more before the Dow ticked 2,000.

But depending on your time horizon, swallowing this 1979 cover would have done bad things to your portfolio.

The market pretty much went straight up after this bullish September, 1982 issue of Time magazine.

Technically the Dow went down after hitting 2,000 — but you were going to have to wait nine months for it to do so.

And anyway, the downtown was short lived.

For the rest of the '90s, the Dow went straight up...

Although the debate would have been pretty brief.

Each year of the '90s was practically matched with its Dow x1000 number. 1997=7,000...


And as it turned out, we fast forwarded straight to 10,000 in 1999.

While blowing through headlines like these, from 1995...

And this Time cover from 1997.

Dow 10,000 is perhaps the best counter-example there ever was to headline risk...

Since a month later we were at 11,000.

If we wanted to, we could pretty much rest our case on the '90s.

Now, it's true that our argument is not foolproof. This headline from Dow 11,000 would have messed a lot of people up.

Because we had a pretty hard time staying above it.

Between 2001 and 2004, the headlines were mostly bad, so there wasn't much risk...

So let's zoom to February 2004, when Forbes proclaimed the return of tech. Ominous?

Not exactly. A year later, we were ready to proclaim the return of Gordon Gekko.

By Jan. 2006 we were heading back toward 11,000...

And several months later, 12,000.

Were we in a bubble? Sure. (This one's from 2005.)

But it lasted a good while. We made it to 14,000.

So now what? If you're a contrarian, you've now had four years of headlines to choose from.

Here's a nice one from 2010.

Don't like Bill Gross? You had your chance.

Barron's was already freaking out last February.

If you had ejected on that issue, you would have missed this...

So you're gonna freak out about this?

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.