With much fanfare, the Dow-Jones Industrial Average crossed the 13,000 mark on April 25. On the day in question, of all the news in the world, CNN.com chose to display this as their big story:

At least the Dow story made the cut above this one, from CNN's front page the same day:

While not as funny as a piano-playing kitty, the hype about Dow 13,000 is laughable in its own way. Sure, the Dow may be up 10% since its weekly high in January of 2000, but the Consumer Price Index is up 22% over the same period! Of course, Dow holders would have received dividends averaging about 2% per year, but considering that the CPI has understated the loss of US dollar purchasing power pretty badly, that's probably almost a wash. In other words, despite the higher nominal Dow price, people who bought and held the Dow in 2000 are still well underwater in terms of purchasing power. But why worry about things like "purchasing power" when you can get everyone all excited because the Dow passed a round number?

I guess this headline would have taken up too much copy space:

Now, scant weeks later, we see that a well-known financial writer has published a column titled Next Stop: Dow 21,000. In this article, the author argues that a 21,000 Dow by the year 2012 is "a lock." This final figure, we are told, amounts to growth of "only about 10% a year." That's 10% per year, before dividends, uninterrupted and compounded, for an already richly valued stock market denominated in a structurally weak currency in a country that's just starting down the other side of a record-shattering housing bubble. And it's "a lock."

It's not much of a leap to be reminded of "Dow 36,000," the year-2000 book that infamously rung in the top of the stock bubble by claiming that stock prices would further triple by 2005. Dow 21,000 by 2012 is quite a bit less ambitious than Dow 36,000 by 2005, we will admit, but the cockiness underlying both pieces sure looks similar to us.

We've already looked at the U.S. stock market's fundamentals and determined that this is not the time for long-term investors to swing for the fences. The brief sampling of market sentiment discussed above only reinforces our conclusions. Overly confident, multi-year extrapolations of recent trends and "a market index passed a round number" celebrations are not the types of things that typically take place during low-risk buying opportunities. Consequently, we will leave our party hats at home and continue to focus on risk-adjusted gains with an eye on the big picture and long-term fundamentals.