The DJIA may seem to have been stagnant since the bursting of Nasdaq bubble (give or take 10%, depending on when you measured the price level), but taking a closer look at these major market indices paints a much more clear picture of reality. Sure it is roughly the same level (hovering around 9-10k) around 2000, but nominal values have distorted the true performance and likely fooled many retail investors into thinking they have at least broke even (though even that is not a comforting feeling either). But as we have been able to ship much of our inflation abroad for the time being in addition to fooling the everyday investor into thinking inflation has been rather benign over this time period, most things in the investment world require taking a closer. Looking behind the smoke and mirrors often paints a much more disturbing picture, as is the case regarding the Dow Jones. To give a rough idea behind what I mean it is best to compare the performance of the DJIA to such things as Oil, Gold, Silver or a more mainstream comparison in the USD index.
- Oil: 30's - 40's
- Gold: $275 - $280
- Silver: $4.75 - $5.00
- USD Index: Approx 130
Many other comparisons can be made but the most popular commodities (at least most often mentioned in mainstream finance today are the aforementioned), in addition to the precious metals being considered a "worldwide currencies". So to put the real return (or lack thereof), here is a rough comparison to the performance of the asset classes mentioned above and the DJIA.
Oil 10 year performance: approx 100%
Gold: 250%+
Silver: 235%+
These DJIA obviously pales in comparison to these various asset classes, but this can alternatively be viewed by looking at the dollar debasement of the US dollar over the same time period. For those who don't know, the US dollar index is the dollar measured against a basket of other industrialized nations currencies. This method (though flawed in its own right as many countries has debased their currency, still represents approx a 42%).
On one last note, the dictionary have conveniently changed the definition of inflation from "an unnecessary increase in the supply of money in credit " to "an increase in consumer prices." Like Jim Rogers says, "Printing large amounts of money has historically caused a rise in prices," which has not shown its ugly face in the form of skyrocketing prices as of yet, but like everything else, we can't defy the laws of gravity. In other words, just because the massive increase in the supply of money of money and credit has not yet shown up in consumer prices means absolutely nothing as history has shown us.
