January 31, 2008
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THIS CHART MIGHT MAKE YOU CHOKE
I apologize if today's chart makes you choke on your coffee...
Below, you'll find the S&P 500 measured in terms of "real money," gold. By measuring stocks in terms of gold, we get a rough idea of how far our stock profits are going when we buy things like milk, hotel rooms, health insurance, gasoline, airplane flights, and homes. All of these things cost much more than they did eight years ago.
You see, stocks in general have gained 69% since the beginning of the bull market in 2003. This return sounds great until we realize gold has increased 165% during the same time. In other words, stocks aren't even keeping pace with inflation.
As you can see from today's chart, the S&P 500 bottomed in real money terms in 2003. It staged a small rally lasting into 2005. Since that rally's peak, stocks have been whipped, losing 50% of their value against gold... By looking at stocks in terms we can eat, drink, and travel on, it's no wonder our relatives are asking how to "get in" on gold.
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