Dow Breaks 10,000 for 26th Time While Gold Shines 23 comments
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Here is another piece of information which investors would never receive on market-pumping outlets like CNBC, and Fox 'News': the Dow Jones index has now broken 10,000 on 26 occasions, with the first time being more than a decade ago.
If you think this means that the Dow index has produced a net return of zero for the last ten years, you're wrong. To begin with, there is no adjustment for inflation in these indices. So, since March of 1999, the Dow has provided a return of zero minus more than ten years of inflation.
Even this overstates the performance of the Dow, since Dow losers are regularly removed from the index and replaced with the latest market-darlings. Thus, the net return on the Dow for the last 10 years would have been a loss of more than 50% (using real inflation numbers).
Keep in mind that every financial advisor will tell you that you must invest in equities, since they provide the best long-term return in the market. The fact that these same market-pumpers continue to push their clients into U.S. equities can only be an indication of corruption, gross incompetence, or (more likely) a simple herd-mentality where these market zombies never actually think about what they are buying for their clients.
Don't assume that this decade of dismal performance is common to all equity markets. To begin with, the stock markets of the BRIC nations like Brazil and China have booked large, real gains – along with many other “emerging market” economies. However, it's not only the markets of developing economies which have greatly outperformed the U.S. markets.
In previous years, the index of Canada's premier stock market (the Toronto Stock Exchange) typically traded more than 2,000 points lower than the Dow. For most of the last few years, on the other hand, it has traded 1500 to 2000 points higher than the Dow.
However, my intent in this commentary is not to simply compare one stock index with another. Instead, it provides a perfect opportunity to remind people of the importance of “wealth preservation”. When I first began to seriously research the gold market, I was originally somewhat disappointed to continually hear talk about gold's role in wealth preservation. It's hardly a compelling “hook” to try to induce people to invest in something where the main selling point is that “you won't lose any money”.
On the other hand, the misguided lemmings who have been plowing their money into U.S. equities for the last ten years would probably wish they had put at least part of that money into something which would have retained its value. And don't make the mistake of thinking “fixed investments” (i.e. bonds) are a viable alternative to precious metals.
True, holding bonds would not have caused the massive losses that investors have reaped from U.S. equities. However, as I point out on a regular basis, all governments lie about inflation. Among the negative implications which this has for investors is that government bonds almost always have nominal returns lower than actual inflation – a guaranteed, annual loss.
Only precious metals offer true down-side protection for wealth. In March of 1999 when the Dow hit 10,000 for the first time, gold was trading at less than $300/oz. Silver was trading at about $4/oz. With gold now at over $1,000/oz and silver at about $18/oz, suddenly “wealth preservation” starts to get sexy.
Indeed, the fact that gold and silver promise investors wealth preservation does not exclude real, positive rates of return. While much of the advance in the price of gold and silver is simply a reflection of the destruction of our currencies by greedy, amoral bankers (who have been destroying paper currencies for 2,000 years), with a soaring global population, and a measly 2%/year growth in the supply of gold and silver, these precious metals are getting more “precious” every year.
In the case of silver, its many industrial uses (typically in tiny quantities) have reduced global stockpiles by an estimated 90% over the last 50 years – according to veteran, silver researcher Ted Butler. Thus, while silver is approximately 17 times as plentiful as gold, as a naturally occurring element in the Earth's crust, all estimates I've seen in recent years put the ratio of above-ground silver to gold at 6:1 or less.
Thus, “wealth preservation” is simply the guarantee which you receive with precious metals that is not available with any other investment. Many U.S. investors have been duped into believing that the over-hyped “TIPS” bonds also offer this guarantee. However, as I pointed out earlier this week (see “Retail sale propaganda pushes Dow toward 10,000”), the U.S. government is intent upon engaging in even larger lies than usual with respect to inflation – since this is the only way in which it can produce a positive number for U.S. GDP.
As I pointed out in that commentary, just before the official collapse of the U.S. economy (i.e. when the government finally admitted the U.S. economy was shrinking), the world was still being ravaged with inflation. At that time, the U.S. government was using a “deflator” of 1% to adjust U.S. GDP. Those foolish enough to buy “TIPS” can be expected to be 'rewarded' with an instrument which provides a nominal return of less than 1/3rd of actual inflation.
I have also pointed out previously that the precious metals market offers much more for investors than just the precious metals, themselves (see “A Novice's Guide to Precious Metals, Part II: the miners”) - there are also the companies which produce these commodities. As that previous commentary explains, precious metals miners (and all commodity-producers) provide leverage naturally (i.e. without employing debt/margin) as an inherent part of their business models.
For me, personally, this has made building my own portfolio very simple. For “wealth preservation”(plus a solid real return) I hold real bullion. Then, with the speculative component of my portfolio, I hold precious metals miners, and selected producers of other commodities. This is a portfolio capable of withstanding the worst economic calamities.
True, the shares of commodity-producers can be (and were) crushed in a genuine “economic crisis”. However, unlike the Wall Street fraud-factories, these companies generate real wealth, from “hard assets”. Thus, only the $10 trillion in hand-outs, loans, and guarantees kept the U.S. financial crime syndicate from completely disintegrating, while only the new, fraudulent accounting rules (see “FASB strong-armed into mark-to-fantasy accounting”) allow them to pretend to be profitable.
Conversely, not only were the commodity-producers abandoned, and allowed to bear the full brunt of the recent collapse in markets, they were all ruthlessly shorted – by the same banks which ran and hid behind the 'skirts' of regulators, then begged for help when they were subjected to the same shorting.
Despite this, the performance of the commodity-producers has been every bit of strong as that of the fraudulent banksters – with two important differences. First, most of these companies are still sporting valuations which are much lower (in relation to commodity prices) than just a couple of years earlier. Second, unlike the banksters, these companies are not hiding countless billions in losses on their balance sheets.
Thus, while the shares of Wall Street banks are grossly over-valued – propped up by continued government support, fraudulent accounting, and the endless hype of the U.S. propaganda-machine – the commodity-producers (especially gold and silver miners) are cheap, and looking at spectacular returns in the years ahead.
Previously, I have warned readers to seek accurate inflation data, so that they can independently evaluate the real rate of return of investments. This is more important than ever, especially for American investors. The only way for the U.S. government to delay formal default on its vast, mountains of debt is through allowing the U.S. dollar to move steadily toward its real value: zero.
Over the next decade, we could easily see the Dow move to 20,000 or 30,000, or even 50,000 – because hyperinflation is the most likely scenario for the U.S. economy (with the only alternative being a Soviet Union-styled debt-implosion). When hyperinflation grips the U.S. economy, investors could double or triple or quadruple the nominal values of their portfolios in the years ahead – and still lose 80-90% of their capital in real dollars.
Only precious metals promise wealth preservation in such an environment. Today, this invaluable insurance is still cheap. However, the explosion in retail demand for gold and silver, plus the flip-flop of central banks from being huge sellers to net buyers of gold point toward a rapid advance in the prices of gold and silver in the near future.
It is time to stop being a “lemming” following the advice of clueless, financial advisors. The continued recommendation of U.S. equities by these disgraced charlatans shows that these shills can't even operate calculators, let alone provide adequate investment advice.
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That's when the "velocity" component of money supply will light the fuse to Weimar-style hyperinflation, because the money won't come flowing out in a controlled, kitchen-sink-faucet manner; it will come flowing out like a tsunami wave.
With no manufacturing base left in the U.S., and China Factories Incorporated more and more reluctant to sell to the U.S. in US$, all that money will be chasing what few goods are produced, or imported.
Hyperinflation, guaranteed.
If anyone has data on the Dow's rate of return over the last decade (measured purely in dividends), please post it and we can adjust the numbers more precisely.
ManAboutDallas, another good point - and I think we're already seeing those bankster billions being deployed, but ONLY with their own in-house trading. They still have NO appetite to lend out money to Americans or U.S. corporations - only for their own gambling in the still-unregulated derivatives market.
I think what will push the U.S. over the brink and into hyperinflation will likely ORIGINATE with the Bernanke printing press - with the banksters only deploying capital into the broader economy when they can capitalize on that hyperinflation.
On Oct 18 02:25 PM PastTense wrote:
> To be fair you not only have to consider the value of the Dow now
> vs 10 years ago; you have to consider the dividends you have received
> in the intervening 10 years (and the Dow pays out a lot more in dividends
> than the S&P 500 or QQQQ).
> The banks will have to start lending out the billions, maybe trillions, they're sitting on right now<
The scary part of that is that no matter what the number of dollar is, it's how it will compound that will be mind boggling. The day the first million of that is loaned out, the borrower puts it into his bank account for whatever purpose and in doing so, that bank can then lend out 90% of it to someone else... and so on, and so on. So the compounding factor is more like 100:1
> That's when the "velocity" component of money supply will light the fuse to Weimar-style hyperinflation, because the money won't come flowing out in a controlled, kitchen-sink-faucet manner; it will come flowing out like a tsunami wave..... Hyperinflation, guaranteed.<
Absolutely bang on the money!
My question though is "what are the chances we'll see a deflationary period first, before the hyperinflation begins?". I think it could evolve that way. So the scenario would be a surging dollar (perhaps for a year or more) in tandem with a sinking stock market (running for the same length of time, whatever it is).
I guess the answer lies in whether or not the banksters will let it evolve that way. They may, because they have the capacity, and the complete lack of morals, and the audacity to allow it and in doing so fleece the "people" even further. Catch it both ways, as it were.
Your articles are a joke and metal pumping as usual to try and pad your own pockets. You dissect select pieces of data to make outrageous statements that have no basis in reality.
In 30 Years Gold has done nothing, You would have lost your shorts taking inflation into account. In inflation adjusted dollars gold needs to reach $2200 to get back to even from 1980. So this authors tries to point out the Dow has gone no where, well GOLD has GONE DOWN THE TOILET!
This Author pumps GOLD & Silver and wants you to come his website Bullion Bulls Canada so that he can make money by GOLD Pumper advertisers paying him a FIAT currency (I deal with Google Adsense and I know for a fact that don't pay in GOLD Bullion) to get you to pay them your hard earned FIAT currency in exchange for a worthless and useless gold metallic element!
Don't buy it folks! Use your brain.
GreatWhite
Let us all know about how to join the club, we are anxiously waiting.
GW
On Oct 18 10:54 AM fireball wrote:
> albertarocks, you rock.
> nener thought of myself as a gold bug but it would bug me not to
> own metals.
>
> well jeff i bought a jr. the other day follwing your guidelines.
> up 10% in a coupla days. good sound advice. thank you. still looking
> to add 2 or 3 more.
> every time i see my little coin dealer he asks if i'm ready to sell
> my silver i bought from him yrs. back. i always laugh, then he laughs.
> then he asks about the gold coins-i laugh-he laughs.
glad to brighten your day.
wan'na join the club? do a little more googling. find the politicians you trust, obama? mccain? bush? clinton? pelosi? which big banks do you trust? which dictaters? which monarchs?
i like making fiat currency. the more i up the paper the more i put into secure bullion savings. i like real assets. federal reserve notes have been a steady decline since inception. 1 oz. of gold will buy about the same goods or services that it would 4000 yrs. ago. the fluctutions in buying power have been minor. that's a pretty secure record. jr. gold miners have made me money, oil has made me money, tech has made me money. if you wish to save dollars good luck. i prefer to keep a percentage in metals. so far they have held up better in buying power.
all things in moderation friend. all things considered perhaps the firarms grade steel and the lead and copper i own have increased almost as well as the bullion. that is considering inflation they are about even. i always thought of the 80's panic as a bubble. time to sell not buy. my bullion average is about $300 on gold and $5 on silver. i'm happy with it.
you want to join the club huh. if we get a nice dip buy. in a few years you hopefully will smile that a portion of your savings are still worth something.
if you have some of that worthless bullion cluttering things up i'll gladly haul it away for free, with a smile on my face.
Gold has ALWAYS done exactly what it's supposed to do and that's to preserve your wealth & buying power and it's been doing it for what? 4000+ years now or so??.
In the 30 years he mentions, what has the dollar done? Here it is on the brink of failure just like EVERY OTHER paper currency known to and tried by man. I believe Voltaire (1694-1778) had it right when he said: “Paper money eventually returns to its intrinsic value ---- zero.” And that's the one undeniable truth we can ALL take to the....proverbial bank, Great White included.
Jeff,
I apologize for the reposting of this comment, but I still would like to know if you have any information regarding the reporting requirements, if any, that an entity, (individual or corporation), has to report for NSR from a mining operation. Is it true for instance that receipt from a contract signed, say in nation X can be paid in nation Y in whatever currency, (or bullion), the recipient desires without having to report the transaction? I have found this subject to be almost as secretive as the Fed's lending practices.
And on a faintly similar vein, do the receipts of authenticity that accompany US eagle coins from the US mint serve a dual purpose of identifying original purchasers? I’m just wondering.
> In 30 Years Gold has done nothing…
> This Author pumps GOLD &…Silver and wants you to come his website…
> so that he can make {“money”} by GOLD Pumper advertisers
> paying him a FIAT currency (I deal with Google Adsense and I know
> for a fact that don't pay in GOLD Bullion)…
> Don't buy it folks! Use your brain.
> GreatWhite
Sorry for putting the {“money”} quotes and brackets in your post but I think that’s the fulcrum of our discussion, as I believe you will agree. Gold’s history as a reserve “currency” of wealth is important, it seems to me, only as far as it relates to a law abiding and sovereign citizenry’s education and commitment to an established system of honor, ethics and dare I say, “morality”? Much the same way as the term “Fiat” relates to the lack of said attributes, the presence and use of gold in the system tends to even the scales to determine the value of the society in question. Mene, Mene, Tekel, Upharsin.
imho
Great White: Stupid is as stupid does! Haters please go elsewhere to push yor agenda. We GOLD BUGS aren't interested in your venom. Contact Obama, maybe he'll let you clean up after his dog.....
I know this is a long shot, but it would be a dramatic manipulation, and it appears there is a big appetite for knowing drama ahead of the effects.
I took a look at your questions a couple times over the week-end. The first one is simply a little too general for me to understand exactly what you are asking.
As for the second question, I have never purchased U.S.-minted coins - so I am not familiar with their "receipts of authenticity."
On Oct 18 11:28 PM Boxed Merlot wrote:
> …the precious metals market offers much more for investors than just
> the precious metals, themselves (see “A Novice's Guide to Precious
> Metals, Part II: the miners”) - there are also the companies which
> produce these commodities. As that previous commentary explains,
> precious metals miners (and all commodity-producers) provide leverage
> naturally…
>
>
> Jeff,
> I apologize for the reposting of this comment, but I still would
> like to know if you have any information regarding the reporting
> requirements, if any, that an entity, (individual or corporation),
> has to report for NSR from a mining operation. Is it true for instance
> that receipt from a contract signed, say in nation X can be paid
> in nation Y in whatever currency, (or bullion), the recipient desires
> without having to report the transaction? I have found this subject
> to be almost as secretive as the Fed's lending practices.
>
> And on a faintly similar vein, do the receipts of authenticity that
> accompany US eagle coins from the US mint serve a dual purpose of
> identifying original purchasers? I’m just wondering.
Sound advice and keep it up!
Instead of just attacking, why don't you share some pearls of investing wisdom from your basement as you sit in your underwear trading?
I'm sure it will be something like - "I wonder how Steve Jobs is feeling today? Duh, I think I'll buy some Apple....
October 20, 1999 DIA price: $103.72
October 20, 2009 DIA price: $100.39
Capital gain/loss: - $3.33
DIA Dividends over that time frame: $21.43 per share
Total Return: -$3.33 + $21.43 = $18.10 per share / $103.72 = 17.45% total gain from Oct 20 1999 to Oct 20 2009.
On Oct 18 02:48 PM Jeff Nielson wrote:
> Good point, PastTense. Those dividends would mean a net loss of less
> than 50% over the last ten years.
>
> If anyone has data on the Dow's rate of return over the last decade
> (measured purely in dividends), please post it and we can adjust
> the numbers more precisely.
>
> ManAboutDallas, another good point - and I think we're already seeing
> those bankster billions being deployed, but ONLY with their own in-house
> trading. They still have NO appetite to lend out money to Americans
> or U.S. corporations - only for their own gambling in the still-unregulated
> derivatives market.
>
> I think what will push the U.S. over the brink and into hyperinflation
> will likely ORIGINATE with the Bernanke printing press - with the
> banksters only deploying capital into the broader economy when they
> can capitalize on that hyperinflation.
13.4% return instead of 17.45%.
Return without dividends is: a loss of 3.21% in DIA no inflation and 4.19% with inflation.
So far this year we are deflationary.
all adjustments - oct 1999 pricing $135.36 per share in price
Oct 2009 out price - $ 100.39
Loss w/o dividends = -25.8% loss
loss w/dividends = -10.0% loss.
I apologize for the triple posting for my being sloppy. I need a delete button on the bottom of my post :-(
Good luck ''Great White"; Wall Street is chumming for ya; you've taken the bait.