Another view, DOW 3000 or DOW 12,200?

[RockOn]

Bloomberg News

This is a video clip, fast forward to the first chart. I'm not a Prechter loyalist, so I'm not pushing him, but he does present an interesting chart. If you cannot tell, the chart shows the DOW in the 3000's.

"OMG, the government is robbing us blind by stealing our purchasing power"

Which is a better measure of real wealth, paper dollars or gold?

In gold terms the DOW is down 71% from it's high, not the 15% or so we think. Is this data mining? Could our purchasing power be going down this fast?

 

[dex]

What system does Preacher use? Elliot wave?

 

[RockOn]

Yes, but it doesn't have anything to do with the chart. I know his record of timing using EW has been spotty, at best.

 

[2B]

If any pundit or newsletter writer was really any good, they wouldn't waste their time with either activity.

 

[FIREd]

Bloomberg News

This is a video clip, fast forward to the first chart. I'm not a Prechter loyalist, so I'm not pushing him, but he does present an interesting chart. If you cannot tell, the chart shows the DOW in the 3000's.

"OMG, the government is robbing us blind by stealing our purchasing power"

Which is a better measure of real wealth, paper dollars or gold?

In gold terms the DOW is down 71% from it's high, not the 15% or so we think. Is this data mining? Could our purchasing power be going down this fast?

If your wealth is in dollar and you spend it in dollar, I don't think we lost 71% in purchasing power since 2000, do you? Although it would depend what you spend your money on I suppose. You know there is a lot of noise about the dollar being in the toilet, but I still feel I get more value out of 100 dollars spent in the US than 100 euros spent in Europe. I don't think things are as dire as they seem. Of course, I could be wrong.

 

[RockOn]

If your wealth is in dollar and you spend it in dollar, I don't think we lost 71% in purchasing power since 2000, do you? Although it would depend what you spend your money on I suppose. You know there is a lot of noise about the dollar being in the toilet, but I still feel I get more value out of 100 dollars spent in the US than 100 euros spent in Europe. I don't think things are as dire as they seem. Of course, I could be wrong.

I don't think we lost 71%, but it might be significantly more than we think. My feeling is that most of us think the price increases we've been seeing (such as oil, copper, gas, wheat, corn and milk) will come back down. Maybe those prices are here to stay and we just need another pocket full of bills to buy them.

 

[Marquette]

Well, here's my personal opinion on two things based on not much time thinking...

While ethanol isn't a ton of our fuel supply right now, I do think its use may have gone up enough to cause a sharp increase in corn prices (at least, the corn farmers I know are happy). As an extension to this, everything that relies on corn (kelloggs, cows, etc) gets more expensive (milk, corn flakes, beef, etc). If we come up with better alternate alternate energies, then these prices may stabilize.

I've been waffling a lot on peak oil lately. On the one hand, we are going to run out of oil (it's not exactly renewable). On the other hand, our shortage right now, I think, is refineries. And, as crude prices increase, unrecoverable oil becomes recoverable. So, at some price point, we may get to a saner increase over time.

Or, the fed let the dollar get away from them, we'll start talking about petro-euros and the dollar will drop so far we'll have mass hysteria in the streets. Either way...

 

[dex]

Yes, but it doesn't have anything to do with the chart. I know his record of timing using EW has been spotty, at best.

Elliot wave is about the chart. Look into it. It really isn't much good for anything.

 

[al_bundy]

too bad the link doesn't have the full video either, saw it on the weekend

all these gold people crack me up sometimes and until Whole Foods starts accepting gold as payment i'm sticking to dollars. what all the gold bugs fail to mention is that many times gold was not the preferred currency because it was pretty much useless in ancient times except when to give it to your woman since all women like shiny things. even the word salary comes from the word salt because salt was used to pay people for work in the roman empire

 

[al_bundy]

Elliot wave is about the chart. Look into it. It really isn't much good for anything.

one of the other elliot wave people publishes a newsletter that is free to everyone a few days after publication. they have been printing money the last 2 months

 

[RockOn]

too bad the link doesn't have the full video either, saw it on the weekend

all these gold people crack me up sometimes and until Whole Foods starts accepting gold as payment i'm sticking to dollars. what all the gold bugs fail to mention is that many times gold was not the preferred currency because it was pretty much useless in ancient times except when to give it to your woman since all women like shiny things. even the word salary comes from the word salt because salt was used to pay people for work in the roman empire

I'm not saying EW is worth anything, that's not the point. Just that in gold terms, the DOW looks much different that in dollar terms.

There are many well known economists that think going off the gold standard was a mistake. Look at old charts, things really changed when we dropped the gold standard. Kudlow, one most of us know, does think this gold rise is troublesome. He says it almost every night on his show. He was a Reagan guy all the way. I wouldn't overly bash the hard money crowd. Just like anything else, the future is unpredictable and they could end up being correct about hard money being superior to fiat currency. It's not impossible for me to imagine going back on a gold standard.

 

[dex]

Adjusting the index for the CPI make some sense for a perspective. Instead of gold, why not oil, copper, corn or bottled water. The gold bugs usually like to use the gold comparison.
As far as things changeing once we went off the gold standard you have to remember that that was done in the mid 70s the stock market took off in 81/82
The value of the gold standard was how it related to budget deficits. The technical aspects of keeping to your gold standard did not allow large deficits.
You could make the case that if the USA did not have a bad balance of trade; large deficits and debt gold would not be as strong as it is.
Gold is also being bid up by large purchase by individuals in Indian and China who do not have faith in paper currency.
Maybe that is what we should be discussing.

 

[al_bundy]

only reason gold is considered so called real money is

1. no one has ever made fake gold
2. in the world of no computers you needed a way to change money between empires. gold was a good common standard.

in the 21st century other than electronics and jewelry it has no value. our current currency exchange system works just fine without gold. if a country devalues it's currency than it suffers the punishment of inflation.

 

[haha]

...our current currency exchange system works just fine...

I think this assertion at least is certainly open to debate.

Ha

 

[FIREd]

We also have to realize that it has never been easier for everyone and anyone to trade commodities. In the past 5 years, it has become fashionable for the average joes and large investors alike to invest part of their portfolio in commodities. This trend has probably helped to jack up the price of commodities beyond what fundamentals alone would have supported. So using commodities as a reference to calculate the stock market's adjusted returns is probably not realistic. I agree with dex that using the CPI would make more sense. But Rockon's point is still valid: adjusted for inflation, the stock market is still way down compared to where it was in 2000.

 

[dex]

I wonder if you adjusted for inflation from the high of 1929 would the Dow be up or down. My guess is that it would be down.

 

[al_bundy]

the gold chart looks a little crazy, but i think oil is priced exactly what it is worth. if people don't want to pay a high price for oil, they can simply find ways to conserve energy. of course most people would rather pay than put up with what they feel is a lowering of their standard of living

 

[RockOn]

only reason gold is considered so called real money is

1. no one has ever made fake gold
2. in the world of no computers you needed a way to change money between empires. gold was a good common standard.

in the 21st century other than electronics and jewelry it has no value. our current currency exchange system works just fine without gold. if a country devalues it's currency than it suffers the punishment of inflation.

The hard money crowd see gold as the "world currency". Invest in it and no matter what happens in one country, you will have a stable store of value. That's how they see Gold as real money. Paper currency is troublesome if the government backing it up is not sound.

 

[al_bundy]

I wonder if you adjusted for inflation from the high of 1929 would the Dow be up or down. My guess is that it would be down.

www.safehaven.com

last year there was an article about inflationary bear markets. commodities have been investment losers in almost every decade of the 20th century.

the three inflationary bear markets we had were 1907, 1937 and 1973

2007/2008 there are many parallels to the previous inflationary bear markets except we haven't lost close to 50% of stock market value yet

 

[RockOn]

We also have to realize that it has never been easier for everyone and anyone to trade commodities. In the past 5 years, it has become fashionable for the average joes and large investors alike to invest part of their portfolio in commodities. This trend has probably helped to jack up the price of commodities beyond what fundamentals alone would have supported. So using commodities as a reference to calculate the stock market's adjusted returns is probably not realistic. I agree with dex that using the CPI would make more sense. But Rockon's point is still valid: adjusted for inflation, the stock market is still way down compared to where it was in 2000.

So making it easier for everyone and anyone to trade causes markets to become priced beyond what fundamentals support? Think of the implications for stock market pricing, $4 trades and all (some offer free trades).

 

[nickel]

I wonder if you adjusted for inflation from the high of 1929 would the Dow be up or down. My guess is that it would be down.

Not sure if this is exactly what you're asking, but according to this inflation calculator:

The Inflation Calculator

$381 in 1929 (this was where the Dow peaked) was worth $4573.31 in 2007. So based on that conversion, the Dow is clearly up by a good bit since the peak of 1929, even accounting for inflation.

 

[RockOn]

Not sure if this is exactly what you're asking, but according to this inflation calculator:

The Inflation Calculator

$381 in 1929 (this was where the Dow peaked) would be worth $4573.31 in 2007. So based on that conversion, the Dow is clearly up by a good bit since the peak of 1929, even accounting for inflation.

thus the "real rate of return" that stocks historically provide, comes in spurts though

 

[Marquette]

comes in spurts though

I heard Bernanke is working on a pill for that, though.

 

[FIREd]

So making it easier for everyone and anyone to trade causes markets to become priced beyond what fundamentals support? Think of the implications for stock market pricing, $4 trades and all (some offer free trades).

Well just a few years ago if you wanted to own corn or wheat, you had to build a big silo and ask the nearest farmer to provide you with the commodity. If you wanted to own oil, you could always build a big underground tank and have the black gold delivered directly to your property. In other words: not very practical. But now, we can all own commodities with the push of a button via ETFs. No storage. So a lot more people and institutions have been able to invest in commodities and drive the price up. Think about pension funds investing even a small portion of the trillions of dollars they manage into commodities and how the price of those commodities can be affected. That was my point. Is the price of oil going up because we consume more and/or produce less or because of speculation? I think both. Gold is another example of commodities going up partly because of speculation in my opinion.

 

[RockOn]

I heard Bernanke is working on a pill for that, though.

If it stays real for more than 4 decades, call the doc.