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Dow Jones Surpassed 12,000 as Inflation Eases and Consumer Prices Fall

The Dow Jones Industrial Average surpassed 12,000, for the first time Wednesday. While the peak was only brief, it indicated that inflation and consumer prices were falling. A finance professor discusses the significance of this milestone.

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    As Jim reported in the news summary, the Dow Jones Industrial Average surged above 12,000 this morning for the first time ever, just three weeks after closing above another record set in January of 2000. What's behind this ascent, and what does any of this mean for individual investors?

    For that, we turn to Michael Goldstein, associate professor of finance at Babson College. Welcome, Michael.

    Does this signal overall economic resurgence or is this just a temporary bump?

  • MICHAEL GOLDSTEIN, Babson College:

    Well, I hope it indicates that things are getting better soon. We have had strong profits, and we've had a reduction in gas prices. We've had a reduction — not very high interest rates. That's all very positive.

    I'm a little less positive, though, that we're going to really make it for a long time over 12,000 right away. In the long run, America is going to do very well, but in the short run, I think we might see some retrenchment.


    You know, the market didn't close at 12,000. It's been bouncing around 12,000 for a while. We love these numbers; how significant are they?


    You know, 12,000 is no more significant than 11,950 or even 1,223. These are just numbers. The Dow Jones Industrial Average is just an average of prices.

    And really what matters is how much return you get each time, not whether we hit a round number. The round numbers psychologically matter to a lot of people, but they don't really matter in an economic sense, especially to the professionals on Wall Street.


    In fact, and adjusted for inflation, is this a record for real?


    Oh, probably not, not adjusted for inflation. I mean, inflation has been moderate over the past few years, but still it takes quite a long time until we really get great, great new numbers. I think this is just a reasonable progress on the long-run health of the United States, but it may be everyone's getting a little ahead of themselves. We may see 11,500 before we see 12,500. That's not that certain.