The Dow Is Crashing!

[zengrifter]

The Dow Is Crashing!
A Story in Pictures by Mike Maloney

On October 4th 2006, the Dow broke its old high of 11,750 set back on January 14th 2000, and from then on all you heard from the financial press was "Dow sets a new, all time, record high"… at least that's all you heard until the correction on February 27th, 2007.

I just don't get it. How can anyone at this point in time (including the financial press) believe they are actually making gains being invested in general equities? On February 20th, the Dow hit its "brand new, all time, record high" of 12,795, and at the writing of this article hovers at 12,560, 6.9% above its 2000 high.

A 6.9% gain over the entire 7-year period… hasn't anyone heard of inflation? Don't investors know that if their portfolio doesn't outpace inflation they are actually losing ground?

The Dow is actually crashing, but if you have not yet educated yourself on the insidious ravages that inflation can have on your portfolio, you can't see it. This is a blind spot investors must be mindful of, and guard against, if they are to prosper.

Anytime that it looks like everything is going up, stocks, bonds, real estate, commodities, and virtually every kind of investment there is, you have to stop and ask yourself, "why?" The only reason the Dow looks like it is going up is because the Fed has pumped so many more dollars into the currency supply, that all asset classes are rising.

...more - http://goldsilver.com/the_dow_is_crashing.php

[zengrifter]

This puts it in perspective -

Since January 2002 the dollar has plummeted 31.25%, verses other currencies.

This has caused money (gold) to rise measured in currency (dollars) as more and more investors move out of their currency and into real money.

In this chart I measure the Dow with money, not currency. It took almost 45 ounces of gold to buy 1 share of the Dow in 1999. Today it takes less than 19. Another way of saying it, if you sold 1 share of the Dow in 1999 you would have been able to buy 45 ounces of gold. Today if you sold 1 share of the Dow, the proceeds would only buy you 19 ounces of real money. So measured in real money, the Dow has crashed 58%.

My favorite… the other real money. Measured in silver, the Dow has crashed 65%.

Here is probably the most important chart in the article. How much oil (our proxy for energy) can you buy with your proceeds from the Dow. If you sold 1 share of the Dow in early 1999 you could buy 800 barrels of oil… today it'll only buy you 200.
As a reminder of rising energy costs, I have included a quote from Adam Hamilton's article, Lies, Damn Lies, and the CPI, June 16, 2000, written just after the Dow put in its "true" all time high.
"On May 1, the wholesale price for unleaded gasoline was 81 cents per gallon."
Remember that oil doesn’t just go into the gas in your tank… it is the single most useful commodity there is. It's used to make medicines, fertilizers, plastics, the tar on our roads and the tires on your car.

Speaking of cars… along with plastics, cars are made of metals like steel, zinc, copper, and lead. Measured against the Dow Jones Industrial Metals Spot Price Index, the Dow has crashed by 73%. And believe it or not, this is one of the reasons the companies that make cars have crashed. (There's a joke in there somewhere but I just can't seem to fish it out). Just take a look at the stocks of GM and Ford over the same time frame. They've crashed by about the same percentage, because the automakers costs are up, and profits are gone.

Boy this next chart really puts the Dow in a pickle, because even the lowly pickle has literally out performed the Dow. This is the Dow divided by the Agricultural Spot Price Index (grains, cotton, timber, vegetables and such), so it's showing how much food, clothing, and lumber you will get with your proceeds from the Dow.
Speaking of lumber, if you sold enough shares of the Dow to buy 2 houses in 1999, today the same number of shares would only buy you 1… at least in my neighborhood.

[MEDITANK]

Excellent post ZG! Bravo! Couldn't agree more with you! The DJIA is still trading like the turd it really is. The MACD has not made a new high to confirm todays new high, so therefore negative divergence is still a threat. Looks to me like a headfake rally.

[sagefr0g]

this analysis seems on track. one thing though, didn't see a timeline chart for how the Fed has pumped so many more dollars into the currency supply.

[zengrifter]

Originally Posted by sagefr0g

this analysis seems on track. one thing though, didn't see a timeline chart for how the Fed has pumped so many more dollars into the currency supply.

One of the problems with that is that last year the Fed stopped reporting its M-1 money infusions. The end is near. zg

[21forme]

So what are you doing to protect yourself? Buying gold?

[zengrifter]

Originally Posted by 21forme

So what are you doing to protect yourself? Buying gold?

YES, gold and silver. Don't delay! zg

[MEDITANK]

exactly. From what I have seen, the USA has been selling alot of its gold and China has been buying most of it since they are or already have based their Yuan currency on gold vs. what the buck used to be but is merely worthless paper.

[sagefr0g]

here is a link that explains somewhat how money infused into the economy by government:

http://www.uri.edu/artsci/newecn/Cla...ey.supply.html

confusing to me. how is it differant from counterfiting

[zengrifter]

Originally Posted by sagefr0g

here is a link that explains somewhat how money infused into the economy by government:
http://www.uri.edu/artsci/newecn/Cla...ey.supply.html
confusing to me. how is it differant from counterfiting

No difference, other than it being legal. Inflation due to money supply infusion is a HIDDEN TAX, and even more hidden now that the M-1 supply is no longer reported. zg