Wednesday, March 17, 2010

The Stock Market Priced in Gold is Actually Down Since Last Fall

A telling illustration if you believe gold is the ultimate store of value, as it is beholden to no government printing press.  The US stock market is actually lower in value today than it was last fall, if you price it in gold terms. 

Meanwhile, if you price the S&P 500 in US pesos, we are in a party for the ages.  Of course most people fail to recognize a flood of new money will push up values of all assets of finite quantity (limited supply of X - oil, gold, copper, stock certificate - chased by ever increasing amounts of paper money)

Even more scary considering much of 2010 has been a period of outperformance for the dollar due to the Greece debacle.

Nominal... versus real gains.  If Ben Bernanke has his way, more Americans are going to learn the difference between the two.  If the stock market is up 40% since 2003 but Alan Bernanke (or is it Ben Greenspan) devalues your currency by 40%, you've truly made nothing.  Luckily for the powers that be, almost all Americans only understand the nominal world.

We'll revisit in 6 months.  Or sooner is Ben's master plan helps get crude oil over $100, and people start wondering why they are paying $3.50 for gas in a tepid economic recovery. (I'm sure they'll blame China or Congress will have the oil executives paraded on Capital Hill; meanwhile Ben will be collecting more power for his Fed)

(just for kicks, the S&P 500 priced in oil - once more, our purchasing power is being destroyed silently)

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