There is a smart fellow named Jason Zweig who writes a column about investing for the Wall Street Journal. (I recommend him as I recommend the Journal altogether, the business section of the New York Times, and Barron’s, the best there is.) In early March of 2012, Zweig had a column about how high the stock market was as it hovered slightly above and slightly below 13,000 on the Dow.
His very smart points were that the Dow was not at an all-time high, but it was certainly very high. He noted that adjusted for inflation, however, it was far from an all-time high. (Actually, adjusted for inflation, it took the Dow about 60 years to reach its 1929 peak, not counting inflation and dividends. I told you that. Mr. Zweig could have told you that in his sleep, I am sure.)
Mr. Zweig brought in one of the big guns in the statistics of finance, Professor Meir Statman of Santa Clara University, to calculate—among many other calculations—what the Dow would be if you had owned the Dow since it started in roughly 1896 and had reinvested all of the dividends back into the Dow. What would the Dow be? This was a difficult calculation to make because so many of the stocks in the Dow are long dead and buried or moved out of the Dow, but he did it anyhow. I’ll have to track him down and find out how he did it.
That’s not the point. If you had bought the Dow when it was at about 10 in 1896 and had received ...