Dow in Secular Bear Market When Priced in Ounces of Gold

This article has 13 comments:

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  User 30121

  Jul 03 08:50 AM
  Haw about 1 to 1 ratio Dow to Gold? Pick a month and year!
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  User 179505

  Jul 03 09:15 AM
  So, does this mean that we've been in "deflation" since 1999? No wonder I feel like despite my increase in income since this time it has never gotten any easier to make ends meet.
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  blink0404

  Jul 03 12:06 PM
  How to survive in this market- sit back and wait for a sign that the market is recovering; until then hold cash, a safety in this market.
  
  Here's a pretty good podcast on what to do during this market- check it out. www.greenfaucet.com/sh....
  
  One of the main problem is that the classic safeholds in this market: coal, steel, bulk shipping, agriculture- are becoming less safe.
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  RickRussellT
  X

  Jul 03 12:22 PM
  I'm not sure I understand indexing against the price of gold. Sure, it's a kind of "panic" indicator. But wouldn't some basket of inflation measures make more sense? I'm not saying the full CPI, since we know how that's constantly getting tweaked. But some basket of well-understood raw materials & manufactured products would provide a more stable comparison baseline.
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  Matt
  Blackman

  Jul 03 12:44 PM

  My Website
  Costing the Dow in gold gives us a measure of what the Dow has done in real terms i.e. when it is measured against the most reliable long-term standard of value. It is tells us how stocks have performed when you remove the dollar effect. By my calculations (similar to the chart above) the Dow has declined 72% since its 1999 peak with similar declines for the S&P500 over the same period. We've been hit by the double whammy of a depreciating dollar and lackluster stock performance in the last nine years. In other words, the investor who simply bought gold and held it in 1999 now has more than three times more money than the investor who bought and held the Dow or S&P - a sobering thought...
  
  Matt Blackman
  Host TradeSystemGuru.com
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  icandoitdon

  Jul 03 02:47 PM
  "Cutting interest rates...and devaluation of the US dollar...has caused pain for the US consumer. This pain is often blamed on president Bush who took office just as the Dow/Gold ratio broke out of the "symmetrical triangle" pattern."
  
  are you serious? the administration is up to its neck in pushing us toward third world nation status. consider administration talking points during the bush presidency:
  
  1. a weak dollar promotes exports.
  2. free trade promotes world economic growth.
  3. low interest rates promote domestic economic growth.
  4. budget deficits don't matter.
  5. we fight terrorists in iraq so we don't have to fight them at home.
  
  every one of these positions has contributed to our weakened state economically and politically.
  
  
  
  
  
  
  
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  Pat C

  Jul 03 05:55 PM
  Thank YOU! I have been doing it in EURO's. This is much clearer!
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  James V

  Jul 03 09:25 PM
  shadowstats.com
  
  This gives you idea of true inflation in USA. The gold price is very indicative of monetary value but is subject to manipulation,speculati... etc which alters its indicative value.
  
  However the bottom line is the same. Taking inflation into consideration. The USA markets have been smashed. Corporate profits are not rosy. People's wages have dropped in real terms.
  The USA has lost its buying power.
  
  The truth is the USA economy has been very bad for at least 10 years. To compensate the USA government has printed more money which most of it has been wasted. The Government created the Technology Bubble to increase tax receipts and create an investment orgy to develop technologies so the USA would have some competitive value in at least one industry (as well as develop technology in the weapons industry). The Government is stimulating inflation to devalue its debt holdings.
  
  The Iraq war, which was hoped to make Energy Security more secure and add to the Economic Wealth and Power of the USA has to date backfired.
  
  Things have been very bad for a very long time.
  What we are seeing now is the compensatory effect from all the bad policy decisions over the last 10 years.
  
  It baffles me, why the USA government does not re-build a decent manufacturing base in the USA and increase import/duty taxes to stimulate domestic manufacturing demand. What the USA needs the most is to add value and produce. Not to artifically drive up asset prices using clever money printing techniques and derivatives. Then send all the money that has been artifically created to other countries like China/Middle East.
  
  Some tough decisions need to be made.
  But no one is making them.
  
  This is because of the hold big business has on the countries powers.
  
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  Mike Stathis

  Jul 04 12:33 AM
  My friend, the fact is that the US stock market has been in a secular bear market since 2001, without factoring in the price of gold. And it will remain in this corrective market for several more years.
  
  Now, when adjusted for the price of gold or the dollar's slide, the market is much worse.
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  paultaut

  Jul 04 02:10 AM
  In terms of the Euro, none of the major averages have gone anywhere.
  
  Everyone seems to think the Falling Knife that is the US Dollar is the cause of a Bubble in all commodities. I, IMHO, believe the rise in Dollar priced commodities has bloated the money supply and the result is a subsequent drop in the Dollar.
  
  As long as the Dollar remains the Reserve Currency and commodities are priced in that currency, more dollars are needed to purchase them.
  
  If there is a Dollar rally, I expect it to be limited to maybe another 8-9% to where it experienced a multi-decade breakdown or from 73 to 80. A "Dead" dollar bounce. Longer term, a drop to the 40-50 range is foreseeable.
  
  Wait for the rest of the world to subject the USA, to the same type of regulations we have imposed on them for decades. Surcharges on our exports, anti-dumping, currency manipulation, etc. or the kind of things we have been doing to them to derive parity between our operating costs and the rest of the World.
  
  I consider Gold to be a sort of quasi-currency which has been manipulated for decades by Central Bank sales. Those sales are ending.
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  GMiki

  Jul 04 06:26 PM
  What can we do right now? Encourage manufacturing here--to save shipping from overseas and start rebuilding infrastructure immediately. That would help.
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  kmne68

  Jul 05 03:44 PM
  icandoitdon,
  
  Can you set aside your Bush Derangement Syndrome long enough to realize that monetary policy is set by the Federal Reserve and not by the president?
  
  As for your list of things contributing to our supposed decline (I would suggest you snap out of it and realize we are the U.S. not Europe and we do not succumb to "decline"), it is worth pointing out that a weaker dollar does make our exports cheaper. Not a reason to devalue the currency but you'll live longer if you look for silver linings.
  
  Free trade does promote world economic growth. To deny this is to deny reality and common sense. Did you build your own car? house? computer? telephone? No, you traded with someone who knew how to do it more efficiently than you. Why would you shut yourself off from other achievers, regardless of what country they achieve in?
  
  Uhm, low interest rates do promote domestic economic growth. They also lead to a weaker currency. The truth of one doesn't negate the other.
  
  Budget deficits may not matter, so long as the borrowing is for something worthwhile. An endless war on poverty (aka Great Society) and paternalistic war on personal responsibility (aka New Deal) are not worth borrowing for. Yet most of our federal budget deficit could be wiped out if the Federal government stopped trying to be the man of every house in the country.
  
  Would you rather fight the terrorists at home? Really? Frankly, I am glad Iraq is acting like a big ole terrorist magnet, pulling all manner of Islamic extremist into the giant meat grinder that is the United States Military. You probably haven't heard (or maybe you are invested in defeat so you didn't want to hear) that our guys are winning over there.
  
  You can keep blaming Bush for your perceived problems. It isn't going to make you anything but bitter.
  
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  thecadean

  Jul 06 03:20 PM
  No kidding. The US has been in an 8 year Bear market and will most likely continue to fail for the next 8 years. This market correction is in keeping with past downturns that have lasted on average 16 years. the US economy has been living on the expansion of credit. Now credit is contracting back to a more normalized state... SELL SELL SELL