Reality Check: The Dow Jones Industrial Average Vs. Bananas
Submitted by Simon Black of Sovereign Man blog,
The Dow Jones Industrial Average, one of the key benchmarks of the US stock market, has soundly surpassed its all-time high. And most of the investing world is toasting their collective success and celebrating the recovery.
It’s a funny thing, really. Most investors only think in terms of ‘nominal’ numbers, i.e. Dow 14,000+ is 40% higher than Dow 10,000 (back in November 2009). But few think in terms of ‘real’ numbers… inflation-adjusted averages.
Everyone knows that inflation exists. We can all look back on prices from the past and realize instantly how much more expensive things have become. Conversely, though, most people don’t think about the stock market like this.
The reality is, though, that when you adjust for inflation, the Dow is well below its highs from over a decade ago.
I thought I’d put this into a bit of perspective.
Take beef, for example. Based on USDA retail price data, today the Dow will buy you 3,332 pounds of beef in the supermarket. This sounds like a lot. But it’s actually about 20% less than the 4,046 pounds of beef the Dow would buy back in December 1999.
And if beef’s not your thing, let’s look at fruit. Based on the wholesale price of bananas, the Dow currently buys you a whopping 15.35 tons of the tropical fruit.
But this is exactly the same amount of bananas the Dow would buy back in February 2008, when the Dow was just 12,266. And it’s a massive 60% drop from June 1999 when the Dow bought 38.51 tons of bananas.
Gasoline is an even more interesting example. Today, the Dow will buy roughly 3,812 gallons of unleaded, non-premium gasoline in the United States. This is almost exactly the same as last January, just fifteen months ago, when the Dow was only 12,633.
But to match its high of 10,718 gallons set in March 1999, the Dow would need to almost triple from where it’s at today.
Look, there’s nothing wrong with investing in great companies. But it’s important to recognize that the ‘buy and hold’ strategy espoused by the vast majority of financial advisors has been a serial loser for the last 10-15 years.
Given that you can’t eat or fuel up your car with stock certificates, it’s important to remember that we all live in an inflation-adjusted world. And that there are serious, serious consequences to out of control money printing by central banks.
Anyone who doesn’t understand this system need only refer to the rules of the popular board game ‘Monopoly’:
“The Bank never goes broke. If the Bank runs out of money, the Banker may issue as much as needed by writing on any ordinary paper.”
Have a great weekend.
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indeed *smokes pipe*
Do a gallon of gas vs the Dow as of July 4th 1999, bitchez.
DJIA was approx 2000 points lower than now (but MUCH higher in real terms) while gasoline was $1.04 a gallon.
The Dow would have to be at 45,000 (in other words, higher than even James Glassman's DOW 35,000 target) to HAVE KEPT PACE WITH GASOLINE PRICES (which doesn't even include the TRILLIONS in "investments" vaporized from the hands of "investors" along the way, plus survivorship bias casualties stacked on top for extra salt in the open wounds).
Print, Bernank, Print!
http://pricedingold.com/dow-jones-industrials/
Great news, Simon! The web address www.pricedinbananas.com is still available! I was suprised Bernanke doesn't already own it.
Horseman's my man! keeps it real. eats his food by the sweat of his brow.
Speaking about horses, we should really weight the beef vs. DJI chart based on the amount of actual real beef in each ton of labeled beef.
Also the energy content of a gallon of gas has gone down, since a gallon of gas isn't a gallon of gas anymore, but gas and corn gas substitute - so that's not apples-to-apples either.
Nothing reflects the whole of the economic situation as comprehensively as does the price and availability of ammo.
Ammo, horses, bananas... Boris is prefer to gauge market by comparison for price of vodka.
And the amount of ethylene glycol in vodka means?
BLS hedonic quality adjustment in the CPI- e.g. Sterno may not yet be the equivalent of Findlandia Vodka, but we'll get there, oh yes we will.
If hamburger is too expensive, a horsemeat Ikea meatball is less expensive, and fan equivalent food for purposes of tabulating BLS "inflation."
New Inflation Gauge Would Cut Benefits, Hike Taxes : NPR
I have a better idea: If you're cold, just sleep outside in the snow, and you'll fall into a warm lull harkening death. That'll cut expenses. Substitute that. If you're hungry, instead of buying and eating food, don't. You'll really save some money that way. Screw medical coverage/treatment and driving. You don't really need to see the doctor & you can walk to wherever your going - cha-ching, money in the bank.
I want to see the Dow priced in escolar chart.
TiS,
Well, the net energy from oil extraction has dropped a lot since 1999. Or so 9 million dollar wells in the Bakken suggest.
If you get desperate Simon ~ you can make yourself some 'bananadine' paste & pretend you're high...
I just had a banana right before lunch (hey I was hungry, OK?) Bananas are CHEAP here in Peru.
Ecuadorian bananas = the best. Cacao too, for that matter. And girlfriends.
Want I want to know, though, from Simon Black, is the Dow priced in llama jaws.
I have not been to Ecuador, so I will accept what you write as true re bananas and cacao. They tell me it is pretty and tranquil (like our just completed visit to Cajamarca, near the Ecuadoran border), except for port city Guayaquil.
My Peruvian wife and I might disagree with you about Ecuadoran women...
Quite.
first off Simon reads ZH and ripped off a poster's monopoly comment the other day. secondly this all seems bullish for stocks.
He sure did. Was about to post the same thing until you pointed him out ripping off another one of our posters. I will say the comment our ZH fellow member posted was fucking awesome.
Pladizow's MONOPOLY comment went all over the hard money circuit ... saw it on JS Mineset and Jesse's Cafe.
Simon Black is a fiction - a ruse, a canard, a prevarication, a lie, Mr Hobbes.(sic) (sp.)
Damn, seems a lot of journalist love them some ZH and the members.
Not much escapes unnoticed around here. Some very sharp minds loiter on ZH.
Simon Black, International Man of Mystery.
Is it true that Chuck Norris nervously checks under his bed each night to make sure Simon Black isn't under there waiting to get him?
Chuck Norris sucks dick for cab fare, then walks home.
No. But it is true that Chuck Norris stores his gold with Chuck Norris. Nobody will ever touch it.
Firstly, we all know plagerism is the sincerest form of flattery. And secondly, even with the borrowed comment this post is quite excellent for Simon and an interesting alternative from what we all know about the dow prices in gold or silver. The dow average is FAKE, FAKE, FAKE. But like the BLS fake employment stats, the MSM keeps pushing this "story".
Nothing can stop the markets now. Not even non POMO days.
I would like to see a historical chart of how much ammo dow will buy
But it’s important to recognize that the ‘buy and hold’ strategy espoused by the vast majority of financial advisors has been a serial loser for the last 10-15 years.
The more intelligent "retail" investor has had this realization. That's why there's so much "money on the sidelines." Heh.
The only folks who still really talk about the "conservative estimate of a 5% return" are the financial pitchmen, the elderly, and the idiots. Most of the idiots appear to work in the mainstream media.
What's for dinner honey?/ Fryed bananas.
What's for lunch honey?/sliced bananas.
What's for breakfast honey?/banana pudding.
Honey, have you seen the dog?
Yesterday's dinner?
In order to get this through to the banksters...you need to price the DOW in hookers and cocaine.
$300 for a $20 trick? That’s a 1500% price hike? Makes arena beer prices look downright reasonable by comparison.
www.cosbysweaters.com/2012/06/13/nba-finals-driving-hooker-inflation-in-...
Even in an inflation adjusted world consumers still set prices. Since nobody would buy beef at the Wall Street inflated prices my local supermarket had to unload a ton of it this week. No pink slime double irradiated bullshit in a tube either. Fresh ground and cut right in front of you. Ground beef $1.99lb, Strip Steaks $5lb, whole tenderloin $8lb, English roast $1.29lb, Brisket $2.99lb.
They even had king crab for $8lb.
The thing with food is that it goes bad. Better to get zero profit instead of eating the loss.
Yes, to unload the inventory.
But if they're not making any money, they won't be able to remain in business.
You see, there is deflation when prices drop 10%, but there is 100% deflation when the company closes down.
Only works once. Then if prices stay up, inventory is LOWER on the next buy & prices stay up for consuming eaters. Keep repeating this no-buy mantra & soon there's a no-store mantra.
The prices will go down until you can't find it anymore. Just means they are liquidating the herds because the cost of feed is too high because of the drought.
http://www.therepublic.com/view/story/0a45ddbae54147ecbfca25b3e59409a9/KS--Livestock-Slaughter
Eventually reverting back to grass-fed beef, and farmland used for human-edible food. So it's not all bad.
Or it all goes to ethanol anyway. Who knows?
Well, the US is a Banana Republic.
And what is wrong with that, other than the fraud, corruption, lies, cheats, psychopatic dictator warlords, etc.?
This illustrates the need to store all of your charts in some exotic foreign location........
Almost closing time. Its time to pump this mother fucker up and hammer PM's. Thats ok, Gives us more time to stack at a discount.
yep
YenC, think we get one more real good buying oppurtunity. If 28.15 to 27.85 fails on silver can see it heading a lot lower do to some compression. Thats why I am thinking one more real good chance at a discount. It keeps going down will keep buying. Now I need to search around to find some good deals to load my boat before the fishing trip.
I think you are a smart man ;-) I'm working on the Z/H forum thing. I'll let you guys know when I finish up some other distractions.
Doritos were $1.69 for a 15oz bag in 2000. Today you pay $4.39 for a 10oz bag.
And, back then, no feces.
Us americans put our chips 'all-in' for junk food.
that means one thing : their revenues will plummet like a rock. the consumer is extremely sensitive to price hikes.
Dow Jones vs The Bandidos
I grow tired of this criminal shit
Short Treasuries BITCHEZ!!!