With the US Dollar making new lows, and the stock market in disarray, 2008 is off to a shaky start. The Fed is faced with few options, none of them very pretty. If they cut rates to try to soften the recession and prop up asset prices, they further lower the value of the currency those assets are priced in, hurting their true value. But the political consequences of doing the right thing – letting a recession wring the weakness out of the economy – are just too painful to seriously contemplate, especially in a presidential election year.
The Charts section has been updated with a new chart of the Dow Jones Industrial Average, this one from 1900 to present. The three big bull markets of this 107 year period, and the following bear markets, are easily seen. It is clear that a lot of money can be made – and lost – investing in stocks over the long run.
From 1904 to 1929 the Dow grew 12 times in value from 47 to 568 gold grams, then gave up 89% of that gain, ending at 64 grams in 1933. In the next phase, the Dow grew almost 14 times, to 893 grams in 1966. This was followed by a long decline, losing almost 96% of it's value, finally bottoming around 37 grams in 1980. Then the next bull market emerged, growing over 37 times to 1,393 gold grams in 1999. The 8 years following this all time peak have been a downward march, representing a loss of almost 56% to the August 31, 2007 close of 618.262 gold grams.
What will the future hold? I would love to hear comments from technicians on this topic… But if the last two market cycles are any guide, I suspect we will see the Dow trading below 200 gold grams sometime in the next 5 to 10 years, and it may not be until around 2035 that a new high is made.
There are many roads that could lead to the 200 gram level; the Dow could move sideways as the value of the dollar shrinks, or the Dow could keep making "new highs" in terms of a plummeting dollar, or the dollar could stabilize or even strengthen while the Dow collapses in nominal terms.
But if your goal is to build your real wealth, the key is to keep your eye on the ball: investing in assets that are growing in gold value, regardless of their price as viewed in the fun-house mirrors of fiat currencies. The Custom Chart service can help you identify those opportunities, and we will be bringing more tools online in the future as well.
Filed under home currency, monetary universe, new highs, price of gold, wages and salaries by 
Just a quick note — I still haven't found a good source for gasoline prices before April of 1993 (if you can give me a URL for this data, I would very much appreciate it!) but I did find the peak price for gasoline in California in March of 1981, the price point quoted in the news articles as being the highest "inflation adjusted" price (until now) for US gasoline.
Filed under monetary universe, money gold, new highs, profitable ideas by
The big news this week is that the Dow Jones Indistrial Average has broken the 13,000 barrier, establishing a new all-time high. What does this all mean? Has the Dow been a good place to invest money? Listen to the first Priced in Gold Podcast to hear my comments on investing, the DJIA, and pricing in gold.
More on Dow Jones Industrial Average Breaks 13000 – Episode 1
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A few months ago, my mother in law sent my wife an old copy of Woman's Day magazine. My wife loves dolls, and the January 1965 issue of Woman's Day featured articles on dolls and doll collecting (along with many other articles that would fit right in with today's magazines, such as "How to Have a New Figure for the New Year".)
What grabbed my attention, though, was the cover price of the magazine: just 15 cents.
I wondered how the price of magazines has changed over the last 42 years, measured in dollars and in gold. And it didn't take long to find out!
Woman's Day is still being published, and a quick trip to it's web site showed that the current cover price is $2.79. Using the London PM gold fix for 4/27/2007 of $21.78/gram, we see that today's cover price is about 0.128 gg. And in 1965? Gold was $1.14/gram, so the 1965 cover price was 0.132 gg.
Let's see… looks like the price is virtually unchanged over the last 42 years when measured in gold, but up a whopping 1,860% measured in dollars!
I don't think the magazine is 19 times bigger, or 19 times better… I think the dollar has shrunk to 1/19th of it's former self.
It's a great example of why I like to track prices in gold!
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