Day 10: DOW 21,700!


The DOW watchers are out in full force. DOW 20K hats and silly glasses abound like it's New Years Eve. I'm not one of those who say it's just a number because I think there is a strong psychological effect of reaching these round-number milestones. But like a sprinter let's don't look at DOW 20K like it's the finish line, let's look beyond to the expansion and growth that's possible in the near term.

I took an old stalwart approach to predicting DOW 21,700! What a weird number but it works. Start with the "Dogs of the DOW" theory. This approach to investing says buy the 10 highest dividend yielding stocks in the DOW in equal amounts at the beginning of the year and then re-balance next year. Over time the Dogs of the DOW approach has had an average return of 20.30%.

Next I'm assuming Apple will repatriate a bunch of cash to us in the US. No I don't think they are going to buy anything except their own stock. At the most I'm assuming apple brings home $150 billion. Assuming they bring home anything at all investors will bid up Apple stock to at least the high end of the analysts consensus estimates of $185/share. So what. Well if Apple trades at $185 that adds 450 points to the DOW! Add in the Dogs of the DOW and that's another 1,250 points and that's how the DOW gets to 21,700 by 2018. The market is an organic thing, it grows, it expands, it inhales and exhales but it always finds its way higher.

The MLP portfolio was DOWN -0.21% for a LOSS of -$1,036.49. Overall GAIN/LOSS: -$3,139.24 (-0.85%)

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Clay Baker

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This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice.
This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities.

© 2016 by Clay Baker all rights reserved