Divided by 10,000

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Dow 10,000 is so widely anticipated that the media have been writing about it for weeks--even though it's yet to happen. We've had our excuses. There was the dubious, theoretical 10,000, reached March 12 by adding individual peak prices for each component to come up with Dow 10,043. Never mind that at no point during the day was the average near that level. Then came the modestly credible intraday benchmark last Tuesday, when the Dow briefly traded at 10,002 based on actual prices before ending the day much lower. On Friday the Dow traded well above the magical mark most of the day, only to sell off again.

I have little doubt that the Dow will close above 10,000 soon, marking its first true breach of the landmark figure and spurring yet another round of news stories repeating what we've already heard: Dow 10,000 is perfectly meaningless, a number, nothing more. But it all seems like a lot of ink to spill over something that is nothing. In my view, the Number is a red alert to the smoke and mirrors that brought us so far so fast.

No, the stock market will not rocket higher or careen into a ditch just because the Dow notches a fifth digit. But Dow 10,000 is a critical plateau in that it will be the product of an extraordinary run. If the Dow had risen at its historical rate of 11% a year instead of its 24% average annual rise since 1994, it would now be nearing 6000, and we'd be years--not days--from popping the cork. No one can say when this period of outsized gains will end. But the same trends will not last forever.

Why has the market soared? Low inflation, cost-conscious management and endless global opportunities for U.S. companies have played a huge role. Those things will persist. But our limitless affection for technology, blind faith in index funds and grossly underappreciated sense of stock-market risk are part of the equation too. And those things will pass. It was only 10 years ago that we stretched reason to justify Japanese stocks' trading at 70 or 100 times earnings--just ahead of that country's enduring recession. Today's most popular stocks trade in that range, and tortured explanations again pass for wisdom.

The Japanese comparison is itself tortured because of our vast cultural and economic differences. Still, Dow 10,000 represents a similar shared trust in the system--a trust that drove Japan to giddy heights and a crushing fall. In the Standard & Poor's 500, Morgan Stanley reports that just 15 stocks (3% of the total) accounted for 52% of the index's gain last year. "The market" may be going up, but it's almost entirely on the backs of a favored few: GE, IBM, Wal-Mart, Merck--all Dow components--along with tech wonders Microsoft, Dell (which I own) and Cisco.