As the Dow flirts with a new high (and the financial media tests everyone's patience), it's worth remembering how far the average investor has fallen and why. In this article, I discuss how far the fall has been.

As for why: investing is about the price paid and the value received. If valuation seems a dry topic in the abstract, it's worth remembering the real world cost of ignorance.

Not surprisingly, I quote from Graham: (I've bolded two phrases of immeasurable importance):

“…the influence of what we call analytical factors over the market price is both partial and indirect – partial, because it frequently competes with purely speculative factors which influence the price in the opposite direction; and indirect, because it acts through the intermediary of people’s sentiments and decisions. In other words, the market is not a weighing machine, on which the value of each issue is recorded by an exact and impersonal mechanism, in accordance with its specific qualities. Rather should we say that the market is a voting machine, whereon countless individuals register choices which are the product partly of reason and partly of emotion.”

The view of the market to the average investor isn't really comparable to the view of the market to the average dollar. Individuals don't have their assets distributed evenly across the equity issues available in the major public markets. A lot of individuals who have held every share they had six year ago are nowhere near where the Dow is today, because they own the wrong Dow stocks and they own very poor performing non-Dow stocks.