Post by unlawflcombatnt on Apr 30, 2007 2:36:03 GMT -6
Below is an excerpt from Peter Schiff's latest article, What Record High? Schiff makes the point that the 13,000 Dow reading is much lower than 2000 when using other measures, such as gold or Euros.
"WHAT RECORD HIGH?
by Peter Schiff
April 27, 2007
As the Dow burst through the 13,000 milestone this week, few understood the hollowness of the achievement. Measured against the rising dollar-denominated prices of just about everything else on the planet, the Dow has actually lost value over the past seven years. Measured against the truest benchmark, the price of gold, the record high for the Dow was set back in January of 2000 when its price equaled approximately 43 ounces of gold. Today it is only worth about 19 ounces.
To better appreciate just how much of stock gains can be attributed to inflation, consider that the record high for the Dow in 1929 of approximately 380 also equated to 19 ounces of gold. So despite all of the hoopla and a thirty-fold increase in stock prices, the Dow has actually gained no real value during the past eighty years. The entire rise from 360 to 13,000 has been an illusion made possible by the magic of inflation. So much for the concept of stocks being a “can’t lose” long term investment -- unless you feel that eighty years is not quite a long enough time horizon!...
Despite its recent eclipse of 13,000 the Dow now buys 30% fewer euros than it did then back in 2000 when it was priced at approximately 11,500. It also buys 35% fewer gallons of milk, 40% fewer bushels of corn or wheat, 65% fewer ounces of silver, 70% fewer barrels of oil, 80% fewer pounds of copper, and 90% fewer pounds of uranium. Try figuring what the Dow will buy in terms of other necessities, such as housing, insurance, college tuition or hospitalization. Any way you measure it, the Dow is worth far less today then it was in January of 2000....
The point to remember is that when it comes to records, it is real purchasing power, not nominal value, that counts. Measured by its purchasing power, the Dow has clearly lost value over the past seven years. Those who have remained invested in Dow stocks during that time period are clearly poorer as a result. Those who continue doing so will likely loss even more wealth in the years ahead, regardless of how many more nominal record highs the Dow sets.
The full article can be found at
What Record High?
"WHAT RECORD HIGH?
by Peter Schiff
April 27, 2007
As the Dow burst through the 13,000 milestone this week, few understood the hollowness of the achievement. Measured against the rising dollar-denominated prices of just about everything else on the planet, the Dow has actually lost value over the past seven years. Measured against the truest benchmark, the price of gold, the record high for the Dow was set back in January of 2000 when its price equaled approximately 43 ounces of gold. Today it is only worth about 19 ounces.
To better appreciate just how much of stock gains can be attributed to inflation, consider that the record high for the Dow in 1929 of approximately 380 also equated to 19 ounces of gold. So despite all of the hoopla and a thirty-fold increase in stock prices, the Dow has actually gained no real value during the past eighty years. The entire rise from 360 to 13,000 has been an illusion made possible by the magic of inflation. So much for the concept of stocks being a “can’t lose” long term investment -- unless you feel that eighty years is not quite a long enough time horizon!...
Despite its recent eclipse of 13,000 the Dow now buys 30% fewer euros than it did then back in 2000 when it was priced at approximately 11,500. It also buys 35% fewer gallons of milk, 40% fewer bushels of corn or wheat, 65% fewer ounces of silver, 70% fewer barrels of oil, 80% fewer pounds of copper, and 90% fewer pounds of uranium. Try figuring what the Dow will buy in terms of other necessities, such as housing, insurance, college tuition or hospitalization. Any way you measure it, the Dow is worth far less today then it was in January of 2000....
The point to remember is that when it comes to records, it is real purchasing power, not nominal value, that counts. Measured by its purchasing power, the Dow has clearly lost value over the past seven years. Those who have remained invested in Dow stocks during that time period are clearly poorer as a result. Those who continue doing so will likely loss even more wealth in the years ahead, regardless of how many more nominal record highs the Dow sets.
The full article can be found at
What Record High?