.floatimg-left-hort { float:left; } .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 12px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 12px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 12px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} Dear Mr. Berko:

Dear C.R.:

I don’t think your broker has a functioning cortex. A 15,000 Dow? I don’t think so! But I’ll pray to Neptune that he’s right.

The stock market in 2009 rose like a phoenix from the ashes of 2008, closing the year at 10,500 with a resounding gain. Other key indexes such as the Nasdaq, the Standard & Poor’s 500, the Russell and the Wilshire all finished last year with impressive gains, too. There were a lot of difficult but positive changes in 2009. Certainly, there’s selective easing in the housing crisis; our gross domestic product seems on the mend; the banking crisis was contained; unemployment may have turned the corner; there’s a definite improvement in investor confidence; the values of most retirement plans have improved; the deterioration of the economy has abated; and interest rates are low.

Still, some pretty serious problems remain: Foreclosure rates are still high; employment will probably remain between 9.2 percent and 10.2 percent; the credit crisis still remains; interest rates and inflation may rise this year; and consumer debt is still dangerously high. This is not a recipe for a strong economy. However, it appears that the weakest economic sectors will not become weaker, and the strong economic sectors should continue to become a bit stronger. I believe these trends will continue at least through the first half of 2010 and should be sufficient to sustain gross domestic product growth between 2 percent and 2.5 percent, but I’m not as sanguine about the second half.

The consensus indicates that the Dow 30 stocks will earn right close to $765 for 2010, and the Dow 30 dividends should total about $288. The large-earning gainers for this year might be Boeing, Intel, Alcoa, Caterpillar, Chevron, Bank of America and JPMorgan. These numbers indicate a potential profit recovery of almost 22 percent, which ain’t chopped liver. So if the current economic rebound stays the course, I think the Dow industrials could trade between 9,400 and 9,640 with a price-to-earnings (P/E) ratio between 12.3 and 12.6.

Yep, this is about 1,000 points lower than the 2009 close of 10,500. But my lower projections discount last year’s excess exuberance for earnings and dividends. My projections also discount the certain increase in interest rates, plus a more restrictive monetary policy.

I do not think the Dow is overvalued at this time, but I do believe that valuations are not as compelling as they were a few months ago. So I think that a 12.3 to 12.6 P/E reflects a fairly valued opinion, which is the consensus of a few big names on the Street.

But be mindful that my 2010 projections do not factor in the “human emotional equation” that can irrationally keep markets overvalued or undervalued for extended periods of time. If I compute this emotional factor as a positive influence (and this is a wild guess), the Dow could rise to 11,800; if it becomes a negative influence, the Dow could drop as low as 7,800. And an average between the two places the Dow at 9,800 — certainly not the 15,000 that your brain-dead broker insists on.

If this is where your broker has aimed your IRA, you need a few more options. A very aggressive broker could ruin your financial health.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, Fla. 33775 or e-mail him at mjberko@yahoo.com. © 2010 Creators.Com