Dow 50,000

 Dow 50,000

 

 

Forty years of Dow Jones Industrial Average performance begs the question "When?" not "If?" the DJIA will reach the 50,000 milestone.

 

As often discussed on this blog, the greatest dangers to the financial farmer are taxation and inflation. In regards to the DJIA, we can clearly see the effects of inflation; the average has a relatively stable linear trajectory from 1984 to 2024. Albeit, there are some SERIOUS instances of volatility cause tremendous slides and spikes. 

With that said, we are about 32% away from Dow 50,000 or just about a third. Over the past forty years the Dow has risen some 37,000 points or 3200%. Is America 32X BETTER than it was in 1984? Doubtful.

As best I can tell, the major "advances" over the past 40 years have largely been in the PRICES. Real wages have fallen after having peaked sometime in the early 1970s. What has increased? The price of nearly everything save perhaps for COMPUTING power. And that is what I argue has been the REAL growth over the past 40 years, indeed perhaps even dating back to the invention of the microprocessor itself.

Nearly every component of the Dow, the the members have changed significantly over the past 40 years, have by definition been industrial companies. Over time though those components have weighted more and more towards technology. The same can be said of the broader S&P 500 Index, whose 505 members are a cross section of the largest companies in the United States.

Today fewer companies make more of the profits, and naturally those companies have higher market capitalizations. It has gotten so extreme that less than a dozen technology companies account for the majority of the capitalization. 

There have been several seminal events over the past 40 years of Dow performance which has driven the market significantly higher. In the early 1980s the taxation structure was significantly changed in the United States under President Reagan. This led to an unprecedented boom.

After the crash in 1987 and recession in the early 1990s I argue the next seminal event was in December 1994 when the Netscape Navigator browser was released. That opened the world to the internet. And even during multiple upheavals during the next 30 years the internet gradually came to dominate global commerce.

I believe we are at a similar inflection point to December 16th, 1994 the day after Netscape Navigator was released with AI today. Via ChatGPT and distribution via the largest company in the world, Microsoft, I believe the world again is going to pivot higher in terms of real growth.

What does this mean for the Dow Jones Industrial Average? Assuming more of its components harness AI, or are even replaced in the Index BY AI-dominate companies, the Dow itself should see meaningful increases in the year(s) ahead and not just due to inflation, but rather TRUE growth in terms of productivity. If the Netscape theory holds, then we should see Dow 50,000 sooner rather than later.

Bread and Circuses

 Bread and Circuses

Few organizations have a license to print money, the NFL is one of those organizations. It also owns at least one day of the week for ~6 months (September-February), and increasingly some Mondays and Thursdays as well. The 32 teams that collectively make up the "trade association," yes they were actually considered a "non-profit" up until 2015. This former non-profit will generated some $9.8 Billion in revenue, coming to about $309 million per team. The growth over the past 10 years has been impressive.

Those are at least the numbers we can gleam from working backwards on data provided by the league's only publicly traded team, the Green Bay Packers. This wellspring of cash is undoubtedly much, much higher as "off-balance sheet" revenue from marketing deals is most likely a multiple of the actual reported TV revenue numbers. The bottom line is that there are probably only 3 people in the country who know exactly how much the NFL is really generating.  And amongst the treasurer, secretary, and commissioner of the NFL, the Commissioner reigns supreme.

Using a typical software multiple of 35, and assuming the true revenue is probably on the order of $50 to $100 billion, the NFL would rank as one of the most valuable companies in the world, on par with Apple or Microsoft or Google or Facebook or Tesla. It definitely has that level of sway in the corporate world as sponsors fight over placement in the never-ending cavalcade of commercial during a typical game.

Where do Americans learn about new cars? Football games. Where do Americans learn who has the best 5G coverage? Football games. Where do Americans learn how to gamble? Football games. This list is long and the influence is strong; if it is advertised during an NFL game there WILL be an ROI on the product or service. Indeed, some of the most iconic ads of all time have been placed during the Super Bowl.

Last year's Super Bowl average ad cost $6,000,000 for 30 seconds, generating nearly HALF A BILLION in single game ad sales alone. But really, what price is too much for marketing immortality? Consider arguably the BEST Super Bowl ad of all time, which is a bold statement, but this ad appeared only once. And it changed the world: 

So maybe changing the world is a good thing, but the flip side of the coin is that the NFL in many ways HAS become 1984 dictating societal norms without ever defining why, pandering to powerful unelected mobs with nefarious goals, and oligarchs siphoning away dollar after dollar of income off the masses. This makes the NFL in many ways the "Circus" of the proverbial "Bread & Circuses" popularized in ancient Rome for keeping the populace in line. Are we much different today?

 

Investing with the NSA

Although this blog post is written half in jest, it should serve as a shot across the bow in terms of our steadily eroding freedom. In many parts of the world we witness on a daily basis fiat and draconian rule by dictators who have cobbled together their authority from the stolen freedoms of their citizens. It is important to remember, as aptly cited by Winston Churchill, that "democracy is the worst form of government, except for all the other forms that have been tried from time to time." Today, it seems more true than ever that the concentration of power in terms of wealth, political influence, and data has seemingly been consolidated against the very principles of our United State Constitution; it is fair to say that we do indeed need change. As the Rothschilds have known for generations, your financial farm is only as viable as the security of the country in which it resides. The future is always opaque, but let's hope as financial farmers we can still harvest the fruits of our labor. Press on Brave New World reader!

It's an odd thing; force a tracking device on people and they rebel, but offer mobile communication and it is embraced. Hence we have the rise of the modern metadata capture, track, store, profile, and geolocate system for nearly every human on Earth. The push into mobile communication devices coupled with social network applications is the mother of all data troves for the NSA. 

What Snowden's leaks indicate, along with recently published legal documents, is that we are well on a course to a Minority Report culture, but rather than using precogs, we have the NSA as a predictive law enforcement system; our very own combination of Judge Dredd and Robocop with drones far more likely to issue speeding tickets than deliver packages. One of the most shocking developments from last year's aptly termed "Summer of Snowden," was the complete media inattention to the very real sarcasm that Snowden was so prominently portrayed in Heller's novel Catch-22.  Pity what the media has become; Orwell's 1984 has nothing on what the NSA has evolved into today!

The question arises, not whether this is legal, against any human rights, or whether the legal system itself has been compromised (secret laws, secret courts, lifetime appointments, mid-six figure salaries, full healthcare and benefits = bought), but rather how can you as a financial farmer can benefit? Following our initial rule set of looking for ways to plant profitable seeds to harvest one day in our own retirement years and possibly pass on to our heirs, there seems to be three general trends to investing along side the NSA if we want to salvage something from the fall of democracy in our republic.

First, we should take a strong look at the telecommunications companies and their buddies the BIG desktop software company and the search giant. There are only a handful of truly global-scale companies and it is a safe bet to assume they have all been compromised whether willingly or not. The bottom line is that people both need and want to communicate. Traditionally this has been done over telegraph and telephone lines, but increasingly (like 100%) the shift has been made to almost a pure internet backbone. So we can put some telecoms in the portfolio, as well as the software company never convicted of running a monopoly, and the company that claims to "Do No Evil." Check.

Second, these new-media social networks are a global data mine! With users signing up for "free" to share their thoughts, opinions, and basically any other personal details, this proves to be the ultimate spiderweb of connectivity. What's really cool is that individuals volunteer this information and it can be scooped up by the terabyte, correlated, analyzed, and processed with supercomputers. Check.

Finally, it is probably a good idea to look at promising medical device makers which focus on neuroscience. Given that the next frontier is to capture thoughts and biometrics, medical device makers that are developing wearable systems that can capture, transmit, and store cognitive electrical impulses have great utility to the NSA; this data provides a looking glass into your soul and clearly indicates a user's intentions. The wearable "fitness" devices currently offered by some of the large athletic companies are a good start; all the users biometrics are being captured and transmitted via Bluetooth to a mobile device with social network apps installed. Perfect!

These three areas of investment all look promising, and don't worry, no doubt the NSA has already logged your IP address for accessing this blog (I would expect no less!) Consider what possible investments can be made alongside the NSA's portfolio, but don't think too loudly...because they're listening!