Can the Dow Hold Above 25,000?

Rock climber clinging to a cliff.

Topic: Human Interest, Investments

James E. Houston CIM, FCSI

January 16, 2018

Image used with permission: iStock/gregepperson


Print & Share

Print

Can the Dow Hold Above 25,000?

(And a well-deserved tribute to a gentleman and great friend.)

Every time the Dow achieves a significant milestone, I’m reminded of my early days on Bay St. and a true gentleman that I had the privilege of working with.

James Houston Grad PhotoAfter graduating from university (see embarrassing photo) and completing my required back office initiation, I was given the opportunity to work and learn the business in the Research Department of brokerage firm, Midland Doherty. There, I worked with, and was mentored by, one John Francis Gascombe Smele, C.F.A.

Mr. Smele was born in England in 1912, and served in the British Army from 1939 to 1946 before being demobilized with the rank of Major and being decorated with the Military Cross 1942 Burma Operations. He was often found, surrounded by young admirers, telling stories of marching his troops around the Indian sub-continent either in the middle of the night or in the middle of the day, before retiring to his tent to enjoy a refreshing gin drink with his fellow officers. I guess what they say about mad dogs and Englishmen is correct. His tales of brave and harrowing midnight raids were absolutely spellbinding.

Mr. and Mrs. Smele emigrated to Canada in 1950, where John’s strong analytical skills drew him to a long and colourful career on Bay St. He survived polio in 1957, but from that time forward, he was easily and broadly recognized by his distinctive gait and well-choreographed cane work. Mr. Smele was a very early Chartered Financial Analyst charter holder and used to frustrate those studying for the three-year program by showing them the small single text book that he was required to study from, for the single exam he was required to pass. He served as president of the Toronto CFA Society in 1966/7.

Professionally, I benefitted immensely from my time with Mr. Smele. Personally, he would, from time to time, test my fortitude, as he had that of his troops. While the stakes were embarrassingly menial in comparison, he challenged me, whenever we had to walk (at a modest pace, mind you) the six blocks to The King Edward Hotel for an investor presentation, not to wear an overcoat, regardless of the January temperature or the wind chill. At the other extreme, we would, on occasion, lunch at one of the few Indian food restaurants in the city, and he would order a lamb vindaloo on my behalf with a smile and instructions to the waiter, spoken in Hindi. By the time we returned to the office, my hair would be matted to my head by the perspiration streaming from its dome.

Whither the Market

So. Let’s get back to milestones. The Dow Jones Industrial Average recently set a record and surpassed the 25,000-point mark for the first time on Jan 4, 2018. On October 14, 1982, John Smele authored a commentary titled, “Whither the Market? Can the Dow Hold Above 1000?”. Three days earlier, the Dow Jones Industrial Average had risen above the 1,000-point level for the third time in its history. The index was unable to maintain the level on its first two tries, but Mr. Smele was about to make another brave call. Before we get to that, I will excerpt his description of the Dow’s first breach of the 1,000-point barrier. Pure poetry. “November 1972 was really the first time the Dow emerged from its shroud into the effulgence of light surrounding the mystique; its sudden propulsion into the bright lights stemmed from a lifting of price controls, and the belief that companies would report substantial earnings gains in an improving and rising economy.”

Upon achieving four-digit status again in 1982, even “…with economic prospects at the bleakest, unemployment rising to unprecedented levels, and grave international developments…” Mr. Smele was resolute. “Incredible though it may seem, we view the longer-term with complete optimism and look for an invasion of the previous high of 1051.70, established in January of 1973, to be completed well before 1982 year-end1. Do we think, then, the 1000 Dow is here to stay: unreservedly, our answer is “yes”.”

t’s hard to imagine that the 25,000 level is here to stay without backing and filling, but do we believe that equities will grow wealth for our clients over the long term? Unreservedly, our answer is “yes”. JEH

1  In fact, the Dow Jones Industrial Average missed it by just a bit. The index close 1982 at 1,046, and breached the old high in early January 1983.

More Like This...

See another CRM2 blog post that may be of interest to you.

No posts found.

More Like This...

See another Foundations & Endowments blog post that may be of interest to you.

That Giving Feeling

Topic:
Foundations & Endowments, Tax Planning
Excerpt:
Summer is now a distant memory. In fact, a radio announcer declared only 77 days until Christmas. Ugh. It is usually in the last quarter of the year

More Like This...

See another Human Interest blog post that may be of interest to you.

COVID: An Uneven – and Unequal – Recovery

Topic:
Human Interest
Excerpt:
Canadians have had enough of the lockdown. Here we are 18 months after you first heard of the then mysterious Wuhan flu. Today, but for any curve ball

More Like This...

See another Inside Nexus blog post that may be of interest to you.

Nexus: Behind the Scenes

Topic:
Inside Nexus
Excerpt:
Over the years, readers of the Nexus blog have been treated to various posts from my colleagues. On the other hand, much like my role at Nexus, I have

More Like This...

See another Investments blog post that may be of interest to you.

The Burden of Experience in a Modern World

Topic:
Investments
Excerpt:
Those of us who started in the industry decades ago have witnessed enormous change. When I finished university in 1982, Japan was the world’s

More Like This...

See another Pearls of Wisdom blog post that may be of interest to you.

“Work, Work, Work, Work, Work, Work”

Topic:
Pearls of Wisdom
Excerpt:
This has been a busy year. I’ve had lots happening on the home front (a wedding!) and lots going on at the office (too long to list!) Managing work

More Like This...

See another Tax Planning blog post that may be of interest to you.

The Great Transition – A Tax Efficient Withdrawal Strategy

Topic:
Tax Planning
Excerpt:
The change from “saver” to “spender” is what I call the great retirement transition. Figuring out how to draw on your retirement savings to meet your

More Like This...

See another Wealth Planning blog post that may be of interest to you.

Living to 100… Is 100 the New 80?

Topic:
Wealth Planning
Excerpt:
It’s a common saying that there are two certainties in life, death and taxes. While we have a pretty good idea when we get taxed, which feels like all

On a Side Note…

See another CRM2 Nexus Notes Quarterly article that may be of interest to you.

No posts found.

On a Side Note…

See another Foundations & Endowments Nexus Notes Quarterly article that may be of interest to you.

No posts found.

On a Side Note…

See another Human Interest Nexus Notes Quarterly article that may be of interest to you.

Worth 1,000 Words

Topic:
Human Interest
Excerpt:
A little humour makes the world a better place.

On a Side Note…

See another Inside Nexus Nexus Notes Quarterly article that may be of interest to you.

From The Editor: Summer Vacation

Topic:
Inside Nexus
Excerpt:
Summertime and vacations go hand in hand. The season is linked with feelings of relaxation and recreation. As kids, we saw the arrival of summer as

On a Side Note…

See another Investments Nexus Notes Quarterly article that may be of interest to you.

Nexus and the ESG Integration Approach

Topic:
Investments
Excerpt:
At Nexus, we think Environmental, Social and Corporate Governance (ESG) considerations are a helpful input to our investment decision-making process.

On a Side Note…

See another Pearls of Wisdom Nexus Notes Quarterly article that may be of interest to you.

A Table for None, Please; Working From Home on the Rise

Topic:
Pearls of Wisdom
Excerpt:
Reading is one of the principal occupations in our profession. As we digest a wide range of material, interesting ideas and surprising facts – some

On a Side Note…

See another Tax Planning Nexus Notes Quarterly article that may be of interest to you.

The Great Transition – A Tax Efficient Withdrawal Strategy

Topic:
Tax Planning
Excerpt:
The change from “saver” to “spender” is what I call the great retirement transition. Figuring out how to draw on your retirement savings to meet your

On a Side Note…

See another Wealth Planning Nexus Notes Quarterly article that may be of interest to you.

Living to 100… Is 100 the New 80?

Topic:
Wealth Planning
Excerpt:
It’s a common saying that there are two certainties in life, death and taxes. While we have a pretty good idea when we get taxed, which feels like all