Recently the DJIA passed through 10,000 once again. It was definitely more fun on the way up than it was on the way down. Achieving the 10k milestone again was interesting for a number of reasons, not least of which were comparisons based on when the DJIA first crossed 10,000 in March of 1999 ten years ago. That is a long enough time to draw some long term conclusions. Let’s compare the DJIA index, oil and gold indicators then and now:
Ten Year Comparison of the DJIA, Oil, and Gold
Indicator | March 29, 1999 | October 14, 2009 | Change |
DJIA | 10,000 | 10,000 | 0% |
Oil | $16.44 | $74 | 450% |
Gold | $280 | $1060 | 379% |
Of course I’ll be accused by nay-sayers for cherry picking data, but I cannot think of a more simple chart to bring home what should be obvious to the American people and government: we are in an oil crisis of very, very serious proportions. In fact, as I have stated before, I believe that oil has become the world’s new reserve currency of choice (replacing the U.S. dollar). Oil has even outperformed gold. That is not surprising since cars and trucks cannot run on gold. That is, oil is a more strategic commodity than is gold. This is why we have oil wars and not gold wars.
Although many today think oil is cheap at $75/barrel, and I suppose that is true with respect to the $145/barrel high in 2008, one only has to look at the $16.44 price of a barrel of oil in 1999 to know that the only way oil is cheap today is from a psychological perspective. Five years ago, $75/barrel oil would have been thought an outrageous price. After 2008, we’ve been conditioned to think it’s now cheap. Well, it ain’t.
