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Auburn experts take Dow surge to all-time high with grain of salt

By: Gus Thomson and AP reports
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The Dow Jones industrial average set a record and kept going Tuesday, providing Auburn investors with more positive numbers to signal an upturn in U.S. economic fortunes.

It jumped from the opening bell, climbed as much as 158 points early and reached 14,286, breaking through its previous record high from October 2007.

Brian Mishler, financial advisor with Edward Jones in Auburn, said after Wall Street closed at an all-time high that the long climb back from a market low of 6,547 in March 2009 is a gratifying one – particularly for investors who have hung on to investing principles during a rough financial downturn.

“Since the low, the Dow is up 118 percent,” Mishler said. “For those individuals who panicked back in the day and are still sitting on the sidelines, they missed out on a 118 percent return over the last five years. Throw in dividends and you did pretty dang good.”

The gains followed the lows of the financial crisis and the onset of the Great Recession. Stocks have rebounded since March 2009, helped by stimulus from the Federal Reserve, even as the economic recovery has been slow and steady.

“Whether they want to admit it or not, everyone is very impressed with the resilience of the market,” said Alec Young, a global equity strategist at S&P Capital IQ.

The last time the Dow was this high, Apple had just sold its first iPhone and George W. Bush had another year as president. The U.S. housing market had yet to bottom and the financial crisis that brought down Lehman Brothers was still a year away.

In Placer County, transportation officials were eyeing stimulus funding to pay for final work on Interstate 80 bottleneck in Roseville and the Auburn Symphony was experiencing a drop in donations during the downturn.

Gary Henson, manager of Auburn’s Northbrook Financial Group, said that investors with Northbrook typically have a diversified portfolio, with stocks just part of the mix that also includes commodities, bonds and cash.

“If the market tanks 10 percent, it wouldn’t alarm me, because of the diversification,” Henson said. “But stocks do comprise a portion of the portfolio so, yes, I’m cautiously optimistic.”

Now is a good time for owners of stock who have recouped some of their losses to review their portfolios, Henson added.

“If stocks do retreat, you’re more protected than you were before by having your portfolio more in line with your current objectives and tolerance for risk,” Henson said.

Even with stocks trading at, or close to, record levels, they are still a good investment because earnings have risen so much, says Darell Krasnoff, managing director at Bel Air Investment Advisors.

“People get overly focused on benchmarks,” he said. “The fact that it’s reached that level is an interesting landmark but it doesn’t say anything about whether the market is over- or under-valued.”