Time to Revisit the Dow Priced In Dollars that Mattered

By John Galt

October 15, 2009

The one thing that is fun about data is that when people find abstract ways to apply it to reality. Everyone who reads these pages probably looks at the DJIA priced in gold but let’s revisit one of my favorite charts, the DJIA and GE priced in the good old greenback. We’ll review the DJIA in current dollars, 1967 dollars (gold standard) and 1982 dollars (when Reagan ruled) and analyze just how much we have debased our currency and the technical tricks you can pull with a dollar debasement. First, let’s review the purchasing power of the US Dollar in 1967 and 1982 dollars as they seem to have stabilized for the past few months:

JGFLA10_151967purpwrUSD

Ouch. That’s going to leave a mark. An almost 85% debasement of our beloved junk buck. Now in 1982 dollars:

JGFLA10_151982purpwrUSDAt least Obama can’t take the blame for that ski slope but his puppetmasters at the Fed sure know how to destroy a currency and as a result, eventually, a nation.

With those cheery graphs as a base let us take a look at the Dow Jones Industrial Average in 1967 and 1982 dollars first:

DJIAjgfla1967DOLLARS10_15

A very telling chart and even though I am no master technician, the destruction of the USD shows up in the DJIA chart when priced in constant gold based dollars. Let’s look at the same chart in 1982 fiat dollars:

DJIAjgfla1982DOLLARS10_15

When you look at the chart with all three overlaid it does smooth out the double top but shows the currency destruction in the early part of this decade when Greenspan decided to accelerate the printing presses and create the bubble to save the tech bubble.

DJIAjgflaALLyrsDOLLARS10_15

That pretty much tells the tale. When you look at the DJIA in current dollars the double top feature is not as apparent but you can understand why I like to start contemplating what we are witnessing in a stable currency environment (67 & 82 dollars) versus the wildly fluctuating USD we are now married to thanks to our Bubblefed.dowcurrent10_15jgfla

Thus why I am still skeptical of this current “bull market” and why the lack of any sort of stable dollar policy could come back to bite the equity “bulls” in their beefy behinds. Just for kicks, just like the last time I did this exercise, I decided to plot Bubblevision’s parent company OE (Obamam Electric) and see what their stock price looks like in the era of moderately stable dollar days:

GECLOSINGPRICEjgfla6782dollars

Wow! Doesn’t that just make you feel all warm inside if you’ve been holding this turkey since 1998? Dollar debasement is fun and when you apply the purchasing power formula to the stocks that are touted like the cheap whores in Congress waive their bills you begin to realize just how bad our current situation really just might be….

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One response to “Time to Revisit the Dow Priced In Dollars that Mattered

  1. Pingback: The Prophetic View News! – October 14-15, 2009 « The Prophetic View News!