DOW 10,000!!!! Oh Wait, Make That 7,537
Another great representation of the amazing loss of purchasing power by the US public are today's oblivious statements about the Dow at 10,000. While in absolute terms the Dow may cross whatever the Fed thinks is a necessary and sufficient mark before QE begins to taper off (Dow crosses 10k just as Treasury purchases expire), the truth is that over the past 10 years (the first time the DJIA was at 10,000) the dollar has lost 25% of its value. Therefore, we present the Dow over the last decade indexed for the DXY, which has dropped from 100 to about 75. On a real basis (not nominal) the Dow at 10,000 ten years ago is equivalent to 7,537 today! In other words, not only have we had a lost decade for all those who focus on the absolute flatness of the DJIA, but it is also a decade where the US Consumer has lost 25% of purchasing power from the perspective of stocks! You won't hear this fact on the MSM.
And if you want to be really scared, here is the comparable representation for the DJIA in ounces of gold. It cost about 30 ounces to buy the 10,000 Dow last time. Now it costs less than 10.
(8 votes)
»
- Login or register to post comments
- Printer-friendly version
- Send to friend
on Wed, 10/14/2009 - 14:14
#98954
You can almost hear Jimbo & MCC....
"Boo-ya bubba.... its still the same dollar in your pocket!!
....yee har 12K here we come!"
on Thu, 10/15/2009 - 14:01
#100022
right, as long as people feel wealthier, what's the problem? chalk one up for bernanke, geithner, llc.
on Mon, 03/08/2010 - 17:15
#258292
I don't feel wealthier, :(
In fact I feel as stretched out as a finger cot on john homes!
on Wed, 10/14/2009 - 13:27
#98956
Get your very own "Thank You, Banana Ben" T-Shirt.
on Wed, 10/14/2009 - 13:38
#98975
LOL. They ruined my country and all I got was this T-shirt.
on Wed, 10/14/2009 - 17:20
#99308
Until the repo man takes it.
on Wed, 10/14/2009 - 17:30
#99320
ROFL. I want that T-shirt. Where can I get one?
on Wed, 10/14/2009 - 18:06
#99351
Today on cnbc:
Bob Pisani: I'm here with Joe Ratterman, President of BATS, the third largest exchange. Joe, the Dow broke 10,000 have you seen any increase in volume?
Joe Ratterman: (silence)
on Wed, 10/14/2009 - 18:29
#99373
You caught that too? Says everything we need to know.
on Wed, 10/14/2009 - 13:27
#98957
i hope there's as much fanfare when i wear my CL 100 hat.
on Wed, 10/14/2009 - 13:30
#98958
True but his doesn't bode well for the Deflationist argument unless you consider the deflationary portion starting early March.
on Wed, 10/14/2009 - 13:31
#98960
Gotta trade your ass off just to keep up!
on Wed, 10/14/2009 - 13:32
#98961
does that mean the cnbc closing bell, circle jerk has been cancelled?
a rhetorical question since once can guarantee there is no "djREALLY 7537" hat. in the absence of a hat, the real number will not be reported on cnbc.
seriously, stunning when faced with that stark truth.
on Wed, 10/14/2009 - 13:37
#98971
Amazingly Erin Bernett was mumbling about 25% down in real terms before Jimbo
jumped in.
What a great shame Jimbo's been bumped........
on Wed, 10/14/2009 - 14:33
#99048
Even more amazingly, Erin Burnett is the only female CNBC host who hasn't let her body go to complete shit! To continue this rally, I'm going long on whoever does the catering to the CNBC offices!
TD- Time to tighten up the CAPTCHA (31 plus __ equals 37 ?!)
on Wed, 10/14/2009 - 15:01
#99096
MCCs is ugly in so many ways. Erin is OK.
on Thu, 10/15/2009 - 10:36
#99798
...I don't know I still prefer Becky Quick. Also cause she reports the news and usually doesn't throw her opinion in the mix.
on Wed, 10/14/2009 - 13:33
#98962
Well, as long as I never travel again, or buy anything imported, or made with imported parts, then I'll be just fine! Is much of our stuff made in China?
on Wed, 10/14/2009 - 13:35
#98969
stick with hookers and Coors and you'll be just fine
on Wed, 10/14/2009 - 14:29
#99047
And look for the girl who considers a lavish date to be "a six pack of beer and some loud music".
on Wed, 10/14/2009 - 13:33
#98963
teh bull rally is fee-nominal!
on Wed, 10/14/2009 - 13:34
#98965
Dow will get down to 2-3oz of gold eventually.
One way or the other.
on Thu, 10/15/2009 - 10:31
#99790
My people are saying, get out of the water before Oct 19.2009.
on Wed, 10/14/2009 - 13:34
#98966
...over the past 10 years (the last time the DJIA was at 10,000)
Should read "the first time the DJIA was at 10,000".
That level has been criss crossed a couple of dozen times in the last decade.
on Wed, 10/14/2009 - 13:36
#98970
Can I say capital flight?
on Wed, 10/14/2009 - 13:37
#98973
Oh, deflation will come, unfortunately the banks will be nice and liquid after having sold back all our shit to us at inflated prices and then down they'll go and we'll sell them all this nicely pumped stocks at bargain basement prices... then 7 months later, the market will skyrocket and the cycle continues.
Keep buying equities and sending our money to the corporations people! Don't buy Treasuries, buy high yield! Don't buy our country, make our dollar weaker!
We will never unite because we are too stupid and this country deserves to fail since no one wants it to win.
That's right, don't buy Treasuries, buy Wells Fargo FDIC insured paper!
Morons.
on Wed, 10/14/2009 - 13:58
#98992
Quite the change in tone in the last 24 hours.
on Wed, 10/14/2009 - 15:21
#99135
Oh no, I absolutely believe everyone should be buying Treasuries out their ass and completely fuck the banks due to capital ratio requirements, but nobody believes it so hey, what does it matter. I'll still make fun of people for sending money to China and then bitching about a weak dollar.
That's like taking a shit and complaining that it stinks.
on Wed, 10/14/2009 - 13:38
#98974
I want my ten years back.
on Wed, 10/14/2009 - 13:42
#98982
I want to understand how it ever got to be that we give the corporations our money and they give it to the government to tell them how to rule us.
Why the fuck do people still invest with these shitty companies?
on Wed, 10/14/2009 - 15:52
#99199
Because we all love a winner.
Seriously. Taking over the worlds most powerful democracy and turning into your personal demesne is one leet bit of work. It's all profit from there.
on Wed, 10/14/2009 - 18:10
#99358
That's trading :P
on Wed, 10/14/2009 - 13:39
#98977
Where would the Dow be if stocks weren't moved in and out?
on Wed, 10/14/2009 - 14:25
#99041
The DOW would be the price of GE because that is the only company still in there since the start :p
If you mean 10 years then its probably negative in a similar way
on Wed, 10/14/2009 - 13:44
#98983
What would the DJIA be with GM still in it?
on Wed, 10/14/2009 - 20:02
#99448
BINGO
on Wed, 10/14/2009 - 13:45
#98984
I BOUGHT DOLLARS RIGHT NOW, PUT ALL MY MONEY IN U$D
on Thu, 10/15/2009 - 08:16
#99573
sounds like the least crowded trade out there
on Wed, 10/14/2009 - 13:46
#98986
What if GM were a dow component?
on Wed, 10/14/2009 - 13:58
#98993
Not just GM.
Now-worthless-piece-of-shit stocks like Eastman Kodak, Citigroup and Woolworth have also been dropped from the index to inflate its value.
on Wed, 10/14/2009 - 13:56
#98991
So, it's more under valued that before I read this.?!!!!!!!
on Wed, 10/14/2009 - 15:04
#99102
That's what I was thinking. There is some truth to that I think.
on Wed, 10/14/2009 - 16:10
#99230
It's more like the entire US was hit by a giant shrink ray, our neighbors, houses, businesses, and currency all look relatively normal to us inside our shrunken bubble. But if we were to ride a time machine back to 2000, everything would look giant, everyone would appear to be 10 feet tall.
The point is basically to take the 10K Dow party with a grain of salt. Our tape measure has been shrunk, and by gold standards, it looks like a doll toy in our hands. It's not saying the Dow is under valued, It's like saying 3' tall is the new 6'11".
on Thu, 10/15/2009 - 15:14
#100116
My god. It's full of stars.
on Wed, 10/14/2009 - 14:04
#99000
People should be mad as hell, instead they've got "DOW 10,000" ball caps over in the CNBS cheering section for cryin out loud.
on Wed, 10/14/2009 - 14:12
#99016
You'd be celebrating, too, if you had beaten the stock market equivalent of the 1986 Chicago Bears. I know this rally has hurt anyone who has stepped in front of it, but these dirty ass sell-side pumpers from Wall Street and CNBS have pulled off the improbable. More important question: Who was the first person of the CNBS set to mention that the hats need to go back into storage for "next time 'round".
on Wed, 10/14/2009 - 14:14
#99021
this is f***ing great! laughing all the way to the bottom of the ravine! HAAHAHAHAHA
on Thu, 10/15/2009 - 09:46
#99626
people are MAD as hell, but THEY are NOT watching CNBC. Hey, keep wtching but don't buy the sponsors products.
on Wed, 10/14/2009 - 14:05
#99003
/spin
What this means is that the DOW is really, really cheap.
/nospin
Geez!
on Wed, 10/14/2009 - 14:10
#99010
any clues on when this ends. Market up 65% in 7 months without any pullback along the way.
I'm kinda sick of this
on Wed, 10/14/2009 - 14:10
#99013
if ZH produced Dow 7537 hats, i think there would be some buyers
on Wed, 10/14/2009 - 14:36
#99055
+10
I'll take two.
on Wed, 10/14/2009 - 14:10
#99014
Someone just goosed it big time to get it over the mark.
on Wed, 10/14/2009 - 14:12
#99017
Or put differently, they can put those baseball caps away until the Dow hits 13,267.88.
Which, at this rate, should be around Groundhog's Day.
Of course, who knows that the DXY will be by then?
on Wed, 10/14/2009 - 14:13
#99019
shouldn't it be DOW 10,000 ten years ago is equivalent to ~12,500 today? as in, we haven't reached the same value yet due to devalued $$?
on Thu, 10/15/2009 - 10:01
#99641
Wow, you're an idiot. Have you missed the entire concept of this post?
on Wed, 10/14/2009 - 14:16
#99022
If it's only 7,537 then buy buy buy!
on Wed, 10/14/2009 - 14:17
#99024
My friggin Pfizer is even taking off! Woohoo!
on Wed, 10/14/2009 - 14:22
#99032
I've spent the past two years overseas in Singapore, and let me tell you that Asia is hurting.
The recovery in commodities prices is somewhat unsustainable even with the pace of production contraction. The commodities indices are being pushed up because of a sinking dollar and stimulus plan procurement of raw materials by East Asia.
Without question, I will be watching the gold and silver markets very carefully. Of course, we must also be aware of the "comex pirates" who have massive short positions in gold and silver, on and off balance sheet, the most prominent being JPM and Goldman. I believe there is an implicit "bailout" assumption from the Fed and other central banks if their shorts start turning sour in terms of more capital to keep a ceiling on the price.
More on this later.
on Wed, 10/14/2009 - 18:28
#99374
Nice! How's that Wesley Scar?
on Thu, 10/15/2009 - 05:44
#99533
there most emphatically is bailout assumptions
which is what triggered the recent imf gold sale
if indeed that actually happens....
however, the lbma recently failed to deliver and
comex is visiting mines to find gold....the buyers
on lbma said hell no to a 25% premium fiat settlement....
there is much criminal behavior surrounding comex
...more gold suppression analysis here:
http://www.gata.org/node/7899
gold is in severe permanent backwardation....
on Wed, 10/14/2009 - 14:23
#99033
DJIA data from Wiki:
March 17, 1997
AlliedSignal Incorporated
Aluminum Company of America
American Express Company
AT&T Corporation
Boeing Company
Caterpillar Incorporated
Chevron Company
Coca-Cola Company
Du Pont
Eastman Kodak Company
Exxon Corporation
General Electric Company
General Motors Corporation
Goodyear
Hewlett-Packard Company
International Business Machines
International Paper
Johnson & Johnson
J.P. Morgan & Company
McDonald’s Corporation
Merck & Company, Inc.
Minnesota Mining & Manufacturing (3M)
Philip Morris Companies Inc.
Procter & Gamble Company
Sears Roebuck & Company
Travelers Group
Union Carbide
United Technologies Corporation
Wal-Mart Stores Incorporated
Walt Disney Company
June 8, 2009
3M (Minnesota Mining & Manufacturing) Company
Alcoa Incorporated
American Express Company
AT&T Incorporated
Bank of America Corporation
Boeing Corporation
Caterpillar Incorporated
Chevron Corporation
Cisco Systems, Inc.
Coca-Cola Company
Dupont
Exxon Mobil Corporation
General Electric Company
Hewlett-Packard Company
Home Depot Incorporated
Intel Corporation
International Business Machines
Johnson & Johnson
J.P. Morgan Chase & Company
Kraft Foods Inc.
McDonald's Corporation
Merck & Company, Incorporated
Microsoft Corporation
Pfizer Incorporated
Procter & Gamble Company
Travelers Companies
United Technologies Corporation
Verizon Communications Inc.
Wal-Mart Stores Incorporated
Walt Disney Company
on Wed, 10/14/2009 - 14:35
#99052
Great stuff.
Look Ma, no AIG.
How about Travelers doing the round trip, awsome.
on Wed, 10/14/2009 - 14:41
#99062
Once those folks at Dow Jones & Co. realized that old-school industrials like Goodyear were the sole reason that the DJIA was lagging, the technology bubble was on it's way.
on Thu, 10/15/2009 - 09:38
#99611
Name one of those companies that hasn't engaged in antisocial or downright illegal behavior. Kraft is selling 9 cents worth of wheat as 3 dollar boxes of crackers.
McDonalds kills people.
Wal-Mart destroys the very structure of societies.
Microsoft can't go one hour without trying to fuck someone over much less one day.
Walt Disney assists in all the cognitive dissonance of society by making touchy feely stories that do not match reality at all and then has the gall to sell them for way way too much. It's like monetized collective energy drug usage.
Pfizer is dying to be the worlds first weapon of mass destruction drug industy able to destroy 100 million livers in a single product cycle.
etc etc.
PS Traveler's WILL go bankrupt. There is 0 chance of it surviving to 2011.
on Thu, 10/15/2009 - 18:31
#100361
+100 thanks...
on Wed, 10/14/2009 - 14:24
#99036
it is self-serving to compare 2 different instruments when one is at the top of the range (gold) with the other closer to the bottom (dow). Or for that matter take and use dollar coefficient over the dow. If gold goes down will you take that into account when looking at the dow?
on Wed, 10/14/2009 - 16:36
#99265
What range are you talking about?
The dow/gold ratio topped at 40 ish and bottomed at around 1. The actual 9.45 is somewhere in the lower range.
on Wed, 10/14/2009 - 14:39
#99058
They really kept a lid on gold (and miners) today. Guess they wanted all eyes on Dow 10k. No distractions.
on Wed, 10/14/2009 - 14:42
#99063
Still short but damn, Bernanke has engineered the biggest rally of all time. How much longer. I know GS will blow out numbers and then it's anyone's guess.
on Wed, 10/14/2009 - 14:43
#99066
Take DIVIDENTS into consideration as well as inflation and the Dow is probably flat over the last decade. Not so terrible for a risk asset.
on Wed, 10/14/2009 - 14:43
#99067
commaaaan DUPONT , get to 39.73
on Wed, 10/14/2009 - 14:47
#99071
Constant dollar valuation of DJIA is a good idea.
We should NOT be celebrating.
Look out Argentina here we come!
on Wed, 10/14/2009 - 14:48
#99074
When it takes about 3 ounces of gold to buy the Dow, I will start selling my gold. I have no idea if that means Dow 15,000, and gold $5000, or Dow 6000 and gold $2000.
on Mon, 10/19/2009 - 20:19
#103995
too early, wait for 1
on Wed, 10/14/2009 - 14:49
#99076
Also, even with the phony CPI nos. cranked out by the govt., doesn't an inflation factor over the last 10 years need to be factored into the Dow's present value? Even if it's something as low as 2.5% at simple interest, the 7,537 number would need to be reduced by 25% more (independent of the dollar's revaluation) thus producing a present real value of Dow = 5,652 or so in constant dollars. Or is something wrong about this methodology? Just curious. In short, isn't the Dow actually much, much worse than the same money deposited 10 years ago in some shit producing passbook account?
on Wed, 10/14/2009 - 14:51
#99081
7537 you got to be kiddin' me. Here's Dow 10k in EUR October 99 - October 2009.
Oct99 EUR/USD 1,18 - Dow 8475
Oct09 EUR/USD 1,49 - Dow 6711
Dow 10k has not been breached the whole decade, even at 14k in USD.
on Thu, 10/15/2009 - 05:13
#99530
What was the interest rate differential between EUR and USD over that time period?
Also what was the cost of carry on gold??? 8% per annum is my guess.
on Wed, 10/14/2009 - 14:53
#99084
That's a neat calc and all, but i live in the US, spend my money in the US. Why do I care how the Dow has performed relative to the dollar? All my dow holdings are in USD (and I rarely travel internationally.)
on Wed, 10/14/2009 - 20:03
#99449
Well it does matter because there has been a constant decrease in our purchasing power, 10$ today doesn't equal 10$ a decade ago so even if our market health says 10K its on a narrower index in terms of purchasing power.
on Thu, 10/15/2009 - 05:47
#99535
because the currency debasement happens in the usa....
do not confuse exchange rate deterioration with
currency debasement....two separate concepts....
even if they go hand in hand...
on Wed, 10/14/2009 - 15:06
#99107
Did you miss it? :)
on Wed, 10/14/2009 - 15:08
#99112
You know what one of the best feelings is?
To watch the market skyrocket, to not have significant funds long or short....
...and not really give a shit.
When the overarching value assessment of the market is that it's a good time to buy anything because the line has been going up, I'm much happier staying far away from this gong show. I'm the sort of investor who likes to put money at a decent price in good companies that, you know, actually produce something of value to society, and so this is not my time.
Maybe next year. Maybe in five years. But not now. This is the time of the baboons in Dow 10,000 hats. Let them have their fun, I've got better things to do with my time and life.
on Thu, 10/15/2009 - 20:20
#100456
Amen.
on Wed, 10/14/2009 - 15:41
#99172
Thanks for this post. Two charts say it all.
on Wed, 10/14/2009 - 16:01
#99216
How about a chart that is DOW Total return analysis (TRA) X DXY , 10 year chart, or even a 30 year chart.
Don't think the DOW in DOWXDXY is a valid numerator for drawing any analytical value.
on Wed, 10/14/2009 - 16:01
#99217
Dollar to Euro 1.50 Let's Party
on Wed, 10/14/2009 - 17:58
#99343
You can still get your dow 10000 hat (made in china) -
http://hats.cafepress.com/item/dow-10000-patch-baseball-cap/12230725
on Wed, 10/14/2009 - 17:58
#99344
You can still get your dow 10000 hat (made in china) -
http://hats.cafepress.com/item/dow-10000-patch-baseball-cap/12230725
on Wed, 10/14/2009 - 18:32
#99378
all distraction.... like in "No Country for Old Men"-- car blows up outside... so he can run in to the pharmacy and steal medical supplies.
Dow 10K.... while everyone is ooohing and aaaaahing bogus health care plan gets shoo'd through.
Just watch.
on Thu, 09/10/2009 - 22:25
#99477
Dow 10,000 , in terms of the real backing of the USD, is also down significantly.
Dow 10,000 in 1999 was worth about 22,935 pounds of lead, but now it is worth about 9615 pounds...a 58% decrease.
More precisely, the last time the Dow crossed 10,000 in the "good" direction, on October 2004, it was worth 55,555 rounds of xm193 rounds (.223 for the m16) now it is worth 21,276 such rounds...a 61.7% decrease in just five years!
Finally in terms of oil...in 1999, at the time of a single Dow Jones Industrial average was worth about 650 barrels of oil, Oct 2004 it was 188, and now it is 132 barrels.
Ultimately, I get the feeling these measures of inflation are the real reason for the cold sweat running down the backs of our politicians and technocrats.
on Thu, 10/15/2009 - 03:57
#99524
So Lloyd Blankfein is corect: Stocks are still cheap!
on Thu, 10/15/2009 - 07:05
#99544
Will the USD rally when the bear market rally ends ?
http://www.zerohedge.com/forum/market-outlook-0
on Thu, 10/15/2009 - 07:15
#99547
try to picture this paradox. lets say that the dollars starts falling at the rate seen in fall of 08 in the equities, the equities start falling at the same rate,and Bernanke starts to print like crazy on a daily basis. Also, lets say the DXY gets hammer like a mofo losing 20% in a day or two; where do you think people and institutions will hoard their money ? Bingo into dollar denominated bonds and treasury bills. Even if the death of the dollar is imminent and easily seen, it is still THE only safe heaven in this economic crisis. Of course we could say that the money will be hoarded into metals; but the thing is; there doesn't exist nearly enough quantity of metals, as seen with the recent development in gold futures where central banks needed to give their reserves to private banks for private banks to deliver them.
on Thu, 10/15/2009 - 08:25
#99578
in the situation you describe margin calls will be rampant and since margin is mostly denominated in dollars, the demand for dollars will be enormous
all this crap in the MSM about the death of the dollar is a giant bear trap IMHO
on Thu, 10/15/2009 - 08:29
#99579
What Cheeky said +
Over at martinarmstrong.org there is a good read.
http://www.martinarmstrong.org/files/Deflation-or-Inflation-Which-is-More-Likely-9-29-09.pdf
Marty says:
deflation if you have confidence in the underlying asset.
inflation if you do not have confidence in the underlying asset.
You might want to get over early if you want to read it as yesterday the bandwidth alloc for his "site" was exceeded.
on Thu, 10/15/2009 - 08:37
#99583
you can find all of Marty's past and future writing here. this chick is a friend of his and she has a direct and firsthand approach to his writings. http://www.scribd.com/kzuur58
on Thu, 10/15/2009 - 09:49
#99628
Cheeky,
…there is not enough metal…
that could turn out in a few ways.
One, everybody believes that metal is not the solution and buys treasury bonds or bills.
Or, metal is in short supply, better get some before it gets more expensive and the dollar looses all value. That could trigger an enormous short squeeze and run on the metal(s.)
Anticipating what will happen is guessing group psychology on an international level. Imagine savers in any country panicking into gold and the resulting price action or a central bank seeing that coming and dumping the countries' gold into that panic.
Or, somebody feels cheated by central banks printing money and votes no by buying metal.
Economic warfare could make this even more messy. Imagine an unfriendly central bank calling the bluff on the gold shorts with intention to do damage.
on Thu, 10/15/2009 - 09:17
#99597
The WSJ is using your analogy on gold this morning. The MSM took a cue from Zero Hedge.
http://aaronandmoses.blogspot.com/2009/10/wsj-on-dow-10000.html
on Thu, 10/15/2009 - 10:48
#99681
"On a real basis (not nominal) the Dow at 10,000 ten years ago is equivalent to 7,537 today!"
I think you mean to say that the other way around. The Dow at 10,000 today is equivalent to 7,537 in 1999
on Fri, 10/16/2009 - 08:59
#100748
I have an idea. If all we care about is jacking up the nominal value of the indexes without regard to currency decay or the underlying fundamentals, why not price the indexes in ZIMBABWEAN DOLLARS. We can really have some fun then - think about it: Dow in the 100's of thousands - might even crack a millie!
Manny
on Fri, 10/16/2009 - 12:11
#100975
Death of the dollar starting on 25th of October 2009......
on Sun, 11/22/2009 - 19:14
#138869
awesome shit, down with communism, end fed, bank bs, insurance bs, i bank bs, and pub education, and grants to university
on Sun, 11/22/2009 - 19:15
#138870
uh did my comment go?
on Mon, 12/28/2009 - 09:22
#175893
Okay, I want to play this game too. The Dow hit 10,000 in 1999 and in 2009. In 1999 you could buy 335.46 gallons of milk with $1000. In today's dollars you can only buy 329.6 gallons of milk for $1000! That's a loss of nearly 6 gallons per $1000 in only a decade! At that rate the purchasing power for buying milk will be only 50% of what it is today in 286 years!
Insert other boring commodities here, but you get my point.