Posted on 12/28/2009 5:46:54 PM PST by blam
Adjusted For Inflation, Dow's Gains Are Puny
By E.S. BROWNING
December 26,2009
Many investors realize that stocks have been among the worst investments of the past decade. But they may not realize quite how bad the decade was, because most people forget about the effects of inflation.
Despite its 2009 rebound, the Dow Jones Industrial Average today stands at just 10520.10, no higher than in 1999. And that is without counting consumer-price inflation. In 1999 dollars, the Dow is only at about 8200 and would have to rise another 28% or so to return to 1999 levels. Using today's dollars and starting at 10520.10, the Dow would have to surpass 13460 to get back to its 1999 level in real, inflation-adjusted terms.
Controlling for inflation takes extra work and makes stock gains look punier, so it is easy to see why stock analysts almost never do it. The media almost never do it either.
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(Excerpt) Read more at online.wsj.com ...
I heard a guy on Glen Beck today say what we’ve all known perfectly. He said (and I paraphrase) that it’s crazy to think that I could take your money, spend some of it, and create wealth by handing you back a piece of it. That’s why, no matter what the Dow does, our economy is screwed as long as Democrats and the non Tea Party Republicans keep spending. Further, unless those running for office don’t start speaking and educating the uneducated voters like this guy on Glen Beck did, any chance for small-government conservatism is finished.
Does anyone know what is up with prices? Is it inflation or just cost increase? I know just last year, a bag of cat food (for example) was $2.97 and now is $4.25. That is across the board increase on all brands. I haven’t noticed anything else specifically, but I remembered that.
The messiah hasn't called for inflation as of yet has he?
Tuna may be cheaper.
Controlling for inflation takes extra work and makes stock gains look punier, so it is easy to see why stock analysts almost never do it. The media almost never do it either.
This is just common sense that anyone with funtional intelligence and perhaps a calculator would conclude. Yet it's lost on everyone - the media, investors, 401 holders etc.
Paper instruments are at best a gamble, at worst wealth destroyers. Few make any REAL money, save the banksters running the casino.
I picked up a container of Breyers Ice Cream the other day when it went on sale.....
It was noticeably lighter in weight...I didn’t even have to check the measurement listed on the box-it was apparent it had shrunk....not such a good “sale” price after all.
Guess I’ll buy the house brand from now on.
(EVERYTHING has gone up-—buy stuff now....don’t wait!)
“bag of cat food (for example) was $2.97 and now is $4.25.”
Yes! My little food processer cat is more expensive to feed!
I believe the dfiniton of inflation has changed several times. Price of gas is not counted anymore?
You may get some idea from this article:
Global Food Crisis 2010 Means Financial Armageddon
Commodities / Food Crisis
Dec 25, 2009 - 04:12 PM
By: Eric deCarbonnel
If you read any economic, financial, or political analysis for 2010 that doesn’t mention the food shortage looming next year, throw it in the trash, as it is worthless. There is overwhelming, undeniable evidence that the world will run out of food next year. When this happens, the resulting triple digit food inflation will lead panicking central banks around the world to dump their foreign reserves to appreciate their currencies and lower the cost of food imports, causing the collapse of the dollar, the treasury market, derivative markets, and the global financial system. The US will experience economic disintegration.
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Cat food is getting so expensive that I have decided to eat rabbit.
“This is just common sense that anyone with funtional intelligence and perhaps a calculator would conclude. Yet it’s lost on everyone - the media, investors, 401 holders etc.
Paper instruments are at best a gamble, at worst wealth destroyers. Few make any REAL money, save the banksters running the casino.”
The last ten years were certainly bad for equities but I’d suggest that if you look at a longer period they have always done quite well. For the last 20 years for example they have done very well. The Dow went from roughly 2500 to 10500 currently where gold went from roughly 400 to just over 1100. Equities have outperformed gold by almost 2 to 1 over 20 years. Real Estate is somewhere in the middle but too many factors to really compare in my two minutes of research. I’m not saying equities are the end all be all but I do believe in a balanced portfolio.
Considering that the dollar is worth (roughly) half of what it was 20 years ago, if you had bought stocks in 1989 and held them, you would have (roughly) doubled your money once inflation is taken into account.
I suppose that one could consider a return of (roughly) 5% per year over two decades doing "very well," but that would be a subjective determination.
As a kid I always insisted on being the banker when playing monopoly with my younger brothers. I always won.
President Bush changed the tax code. During the 1990s, too many companies were shielding their investors from having to report profits annually by investing their profits, rather than giving dividends. The result was that corporations created a bubble chasing down places to reinvest their profits.
Any analysis of profits should include dividends, not just price valuation.
Not sure if you ever did this, but a lot of monopoly players would "break" the rules and put all of the collective monies raised from Community Chest and Chance into a pot that would go to whoever landed on Free Parking.
As an analogy, a lot of the players in today's real markets get to be banker, and at the same time have the game rigged to where they always land on Free Parking.
Goldman Sachs comes to mind.
Here's the answer to your question. Read this article:
Everything is subjective but I’d suggest a gross return in excess of 7%, especially given the last decade, is good by most standards. It’s better than good when compared to most alternatives. Gold for example has merely kept pace with inflation over the same period. I merely object to equities being referred to as a rigged game when today, more than ever before, the man on the street has access to equities as never before. It is not a rigged game but there are fees and institutional players naturally have better prices and additional opportunities. Those who shied away from equities for all manner of reasons or perceived grievances have generally lost out on a great opportunity. I like all investments to some degree or another and the key is so long as folks are saving and investing, it’s all good.
The mention earlier from the original poster re the 401K issues is so utterly misguided. An employee dumps a $100 in at a cost of $65 so they have a 50% return on day 1. I don’t care what they invest in they will do pretty well starting with a 50% gain.
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