Stock Market Valuation in Ounces of Gold

On 09.23.09, In ANALYSIS, by Cal

The recent 6-month run in the stock market has baby boomers and the collective investing community jumping for joy. Double digit gains approaching 50% for some investors and retirees have eased the pain temporarily.

The recent 6-month run in the stock market has baby boomers and the collective investing community jumping for joy. Double digit gains approaching 50% for some investors and retirees have eased the pain temporarily. However, few people realize how obscure market gains can be – especially when priced in terms of precious metals like gold. Everyone wants to talk about the economy being back on track, but few people discuss our weakening currency. Is it possible that we have borrowed and stimulated our economy to the point of no return? While the stock market is currently hitting yearly highs, the value of the dollar is near all time lows. A unique look at stock market prices in terms of gold tells a chilling story.

Dow Jones Industrial Average by the Price of Gold

stock market value in terms of gold

It is quite shocking to see the Dow Jones Industrial Average fall in relation to the price of gold. For the last 10 years massive wealth destruction has carried out, behind a curtain of bullish propaganda. While your portfolio may be rising to higher levels, it has done so at the expense of the US dollar and massive inflation. Now you might be wondering why you should care. First, the value of currency is relative to what it can purchase. When government dilutes currency purchasing power is lost. Secondly, dilution is a hidden form of tax or even "theft" since the Federal Reserve has no authority to print money. Newly issued currency steals value from existing currency. A lot of currency theft has already taken place and more will come as seen by the value of the US Dollar.

usd monthly

The last point that should be discussed in this article is the topic of diversification. Most of us understand the concept of diversification after the Dot Com bubble and Worldcom and Enron scandals. However one place almost all Americans fail to acheive diversification is in their currency. Most Americans are 100% invested with the United States Dollar. Retirement plans, stock portfolios and bank accounts are 100% anchored with the US Dollar. This is alarming since our current monetary policy is set on trashing the value of the dollar. Additionally, no fiat currency has ever lasted more than than the human lifespan. You have already diversified in financial instruments like equitities. Now take the final step and consider diversifying out of the US dollar. How can you do that?