You won’t get this prospective from the shills and shysters on CNBC. The record high in the Dow, touted by the talking heads, is in fiat dollar terms. In terms of real money – gold – the Dow is still 65% below it’s 1999 high. And that is after a huge rally from the 2009 lows. With stock valuations at record highs and gold having fallen 37% from its 2011 high, do you really think the Dow has a snowball’s chance in hell of even coming close to its all-time high. Not bloody likely.
For some perspective on the long-term performance of the stock market, today’s chart presents the Dow priced in another global currency — gold. Today’s chart illustrates how it currently takes a touch more than 15 ounces of gold to ‘buy the Dow’ (i.e. the Dow / gold ratio) — well off the 44.8 ounces it took back at its peak in 1999. From the 1999 peak until 2011, the Dow (priced in gold) endured a massive bear market. Since 2011, gold has struggled while the Dow has continued to rally. All of this has resulted in the Dow (priced in gold) rallying in a well-defined, upward sloping trend channel. Despite this strong rally, however, the Dow (priced in gold) remains well below its 1999 peak.
So, sell gold and buy stocks?
But “gold having fallen 37% from its 2011 high” is priced in dollars. Not yen, euros, or any of the other paper currencies.
I see it as a balancing act. Gold dropping in dollars just means the dollar is up. I get paid in dollars, so yay me, I got a raise!
When the financial crisis happened, and the government responded by bailing out the banks (why not the depositors or mortgage holders?) and borrowing over $1 trillion a year from the Fed in freshly-printed money, I wondered how long that could possibly last. Turns out, maybe quite a while. Turns out, all the other countries in the world are doing the same thing. We are hopelessly incapable of paying back all the money we have ALREADY borrowed, but we keep borrowing more, so somebody must still be lending to us.
We (the dollar) are the cleanest dirty shirt in the hamper, so gold isn’t doing well in dollars. You can’t take your gold to Hy-Vee and buy groceries with it – you’d have to exchange it for dollars first. Better off just using the money from your paycheck. It’s starting to seem to me like all the shirts in the hamper are not going to do anything but get dirtier and dirtier. I really don’t see an end in sight.
So, when little old lady Pirate Jo gets to her final days, I’ll either sell my gold for cash to buy my Ramen noodles, or leave it to my niece, along with my library of leather books.
When people ask me what I put my money into nowadays, I say, “Time off work.” This may be the only retirement I’ll ever get.
Speaking of which, starting next month I’m going to three days a week for the rest of the year. It won’t be as nice as having a six-month block of time off, but I’ll still be coming out ahead every month and it’s still more days off each week than working. My reasons for doing it are that 1) I like this company and want to build a good relationship with them, rather than take off when they are at their busiest, and 2) When Holly-berry, the sweet little old pug lady died, I fought pretty hard to save her life. The vet bills cost me four months’ worth of time off work.
That’s how I measure everything – gold, dollars, what-have-you – how many months of time off work will it buy. Quit agonizing over the price of gold vs dollars and start looking at the currency that matters most – your time.
@PJ, I wish I lived close to you, I would love to have an adult beverage, or ten, with you!
All we have is time. My entire life I’ve looked at my purchases vs my time.
I want a new car, I do not want to put in 30-40 hours a month for the privilege. I’m driving my hated mini-van, but it is paid for and not requiring much in repairs and maintenance.
I’m taking my sister and daughter in law away for a show and a night next month. I have to work 20+ hours to pay for it if they stiff me (real possibility, and daughter in law is working it off). It is still worth it, so I’m in.
Even as a kid I had that figured out. I have met very few adults that understand the concept. My machinist spends 40% of her month working for the privilege of driving her car. She just gave me a blank look when we talked about this prior to her buying it.
No wonder the world is so messed up when the only REAL thing we have (our time left) is completely squandered, undervalued and misunderstood.
Oh yeah, I wish I could buy gold, but I can’t afford it.
So I buy silver, which will be used to survive/buy depression level assets, or for health, or as gifts to offspring and extended offspring.
It amuses me that people still try to “value” money/gold. It doesn’t matter what others value it for unless you want to trade/use it.
The silver I bought at $20, $25, hasn’t “lost” anything. It is just as shiny and pretty and ready for use as it ever was.
And I know that someday, it will be worth something else and as long as I can use it to buy something of value I want, it will be the best investment I’ve ever made.
As opposed to my retirement fund, savings account and brokerage. All 100% contingent on no shit hitting the American financial fan. Yep, my silver hasn’t “lost” a darned thing.
TE, how do you know you don’t live close to me? I’m in Iowa. I’m up for those adult beverages any time.
“She just gave me a blank look when we talked about this …” Yeah, I’ve seen plenty of those blank looks. I’m so tired of stupid people! I don’t even talk to them anymore.
Don’t knock that minivan, though. I’m thinking of buying one for my next vehicle. I love those things! They’re like legos – you can take seats out and put other stuff in, then take the other stuff out later and put seats back in. AND, if you buy a more recent one, you can get a DVD player and spend a whole month watching Lord of the Rings on your way to work and back!
I’m driving a 16-year-old beater (an Isuzu Amigo!) that just keeps going. When it dies, I’ll probably be sad. But I won’t spend more than $5K on the next one. Because a month’s worth of living expenses for me is around $2K – so you get up to $6K, and now you’re talking a whole summer!
But you let me know if you want to stop by – you could use some time away from that husband of yours anyway, it sounds like. You take care.
@PJ, I’m in Michigan, the SE corner. Yep, I could use time away, anytime.
BUT, the universe keeps bringing up Kentucky. Over and over and over in the past few days.
So, if I take a trip this summer, I’m thinking it has to be KY. Not sure why, but there are a few courthouses and a ton of dusty records I need to pour through. Feeling compelled to learn/document my ancestry. For some reason I have the distinct premonition that if I don’t do it this year, I’ll never be able to do it.
I’m old enough to have learned my gut doesn’t lie very often.
TE that stuff is interesting . 50 years ago my auntS on my fathers side did just that in Kentucky. Some ancestors had some pigs and a mule and could read and write. No slave holders . One aunt still alive at 101 and still tells wonderful stories.
@Over, there was a big rift in my family somewhere down the line and my section left the “betters” (were expelled) with money and land and a county named for our family, and numerous federal judges over the past century or so.
Plus, the reason for the rejection, as told by family so subject to human nature, is that my 2 time great grandfather married a Native American and was disinherited by his father. Thus 2xGG and his sons (my great grandpa), went into the mines, my granddaddy was born into the first generation to go from mine to factory/other labor. Grandpa went into chemicals, which is what ultimately shortened his life.
I hope to find the truth, I think it lies between Kentucky and Terre Haute Indiana where my dad was born in a ramshackle house.
Part of the big problem with America is our constant need for the novel and new. And our deep love of spitting on, turning our backs on, and destroying our history. This is seen from our school buildings and government offices, to our families.
We are truly a throw away society. My how things are going to change.
“Part of the big problem with America is our constant need for the novel and new. And our deep love of spitting on, turning our backs on, and destroying our history. This is seen from our school buildings and government offices, to our families.”
TE, is this ever true! In fact, I think it is our major problem. It is the constant hankering for novelty that has made us a country totally ignorant of history (“history is bunk”) and has wrecked our civil institutions, notably our cities and given us the ugliest architecture ever conceived – any medieval stone peasant cottage mortared with mud and built by hand by some illiterate farmer in the 8th century without the benefit of even a plan, has more beauty and integrity than the typical American commercial structure or subdivision house. And it has filled our landfills with trash that will linger long after our society is gone.
Worst of all, it has shortened our vision to the time-horizons of a two-year-old. Someone- I think it was Ayn Rand- said that your can judge a person by his time horizons- the greater the mind, or civilization, the longer the time horizon. Or, as Gloria Stienem once remarked, rich people plan for three generations while poor people plan for Saturday night. We are a country of people who somehow think that life ought to be one big, long Saturday night filled with “excitement” and easy, brainless “fun”.