When measured in ounces of Gold, the DOW has been in a secular bear market since
peaking in late 1999.
A chart of the DOW Jones Industrial Average (
DJIA Charts)
priced in gold shows the markets are not as healthy as one might think due to
the decline of the US dollar.
- Back in 1999, it took 45 ounces of gold to buy the DJIA.
- Today it only takes 10.31 ounces of gold to buy the DOW!
The good
news is the chart shows the DOW:Gold ratio is very over sold.
Cutting the
Fed Funds target rate from 6.50% in January 2001 to 1.0% in June 2003 may have
inflated the US stock market out of its March 2000 to October 2002 bear market
when priced in dollars but it had consequences. These consequences include
causing the housing bubble whose collapse has made things worse today as major
US banks have failed in the past year. Skyrocketing commodity prices may have
pushed us into a global recession also.
Now the Fed has cut the Fed Funds
rate to a rage of zero to 0.25%. This could cause another inflationary bubble
somewhere if the Fed succeeds in preventing a deflationary depression by its
actions. I added significantly to my favorite TIPS (Treasury Inflation Protected
Security) fund (Charts of
VIPSX TIPS
Fund) recently when the base rates were over 3.0%:
| Date |
5 yr |
10 yr |
20 yr |
30 yr |
|
TIPS |
TIPS |
TIPS |
TIPS |
| 10/4/08 |
1.60
|
2.16
|
2.45
|
2.42
|
| 10/11/08 |
2.46
|
2.96
|
2.97
|
2.94
|
| 10/18/08 |
2.52
|
2.86
|
2.88
|
2.83
|
| 10/25/08 |
2.92
|
2.98 |
3.02 |
2.98 |
| 11/1/08 |
2.80
|
3.13 |
3.34 |
3.31 |
| 11/8/08 |
2.18
|
2.71 |
2.97 |
3.17 |
| 11/15/08 |
2.42
|
2.86
|
2.8
|
2.79
|
| 11/22/08 |
2.50
|
3.01
|
3.03
|
3.05
|
CDs have been a
"safe haven" for those wishing to preserve assets and get a small inflation
adjusted return. See "Very
Best CD Rates with FDIC" for a list of the best rates and
terms.
US Treasury rates are so low,
that they are paying less than long term inflation
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The above story is the opinion of the author only and it does not reflect
iStockAnalyst opinion. Further, the author is not personally advising you
regarding the suitability of the story for your investment needs. In no event
iStockAnalyst will be liable for any loss or damage including without
limitation, indirect or consequential loss or damage, or any loss or damage
whatsoever arising from or arising out of, or in connection with the use of this
information. Please consult your investment advisor before making any investment
decision.
