SOS Dow Jones 10,000, make 50% since March a Myth in real term?

Another great representation of the amazing loss of purchasing power by the US public are today's oblivious statements about the Dow at 10,000. While in absolute terms the Dow may cross whatever the Fed thinks is a necessary and sufficient mark before QE begins to taper off (Dow crosses 10k just as Treasury purchases expire), the truth is that over the past 10 years (the first time the DJIA was at 10,000) the dollar has lost 25% of its value. Therefore, we present the Dow over the last decade indexed for the DXY, which has dropped from 100 to about 75. On a real basis (not nominal) the Dow at 10,000 ten years ago is equivalent to 7,537 today! In other words, not only have we had a lost decade for all those who focus on the absolute flatness of the DJIA, but it is also a decade where the US Consumer has lost 25% of purchasing power from the perspective of stocks! You won't hear this fact on the MSM.

And if you want to be really scared, here is the comparable representation for the DJIA in ounces of gold. It cost about 30 ounces to buy the 10,000 Dow last time. Now it costs less than 10.

MyView

1. Is it not better to put your money in GOLD rather than DJIA?


2. Since 1971 when US does away with gold standard, the US dollars in gold terms had lost about 97%, that means if you buy 1 oz of gold in 1971 at say USD35, today, you sell to the market the same oz of gold you will get USD1050, i.e. 30 times more.


3. Your question will be, would it better to keep Gold today and 40 years later, gold will get to about USD31,500 per oz? Assuming it is on a straight line basis.


4. Well if you buy gold in 1980s at say around USD850 per oz, and today USD1050 per oz, you gain about ONLY 24% in 29 years. THAT is a bad bad investment.


5. But if you buy in 1998 at USD300 per oz, today is USD1050, you made about 350% in 10 yrs, not bad.

Lets see

1. Buy in 1970 (US35/0z) - you gain 3000% in 40 yrs


2. Buy in 1980 (US850/oz) - you gain 24% in 30 yrs


3. Buy in 1990 (USD420/0z) - you gain 250% in 20 yrs


4. Buy in 1998 - (USD300/0z) you gain 350% in 10 yrs

The question is if you buy in 2010, say USD700 per oz or 2009 at USD1050 per oz, what would you get in 10yrs time?

Be careful, what we are saying here is financial assets in GOLD (futures) not physical GOLD. Physical gold and Financial Assets in Gold is totally different in terms of DEMAND and SUPPLY. Example, physical gold used for jeweries (70% of the usage of gold, 30% kept in vault) has dropped to 20 yrs low, i.e. demand for physical gold dropped over last 20 yrs but WHY did Financial Assets in Gold goes up 250% in the same 20 years (1990 t0 2009)?

Isn't this defy logic? Financial Assets in Gold is merely, FIAT GOLD CURRENCY, the same as FIAT money. Anyway, Financial Assets in Gold is worth easily 10 times more than all the Physical gold worth on earth. How do we reconcile this? You will find it odd at times when the value of Financial Assets (in GOLD) traded in the market is 10 times higher than the existing physical GOLD produced.

Warren Buffet once said, what economic value created by GOLD when you mine it in South Africa, and transport it and store it in the vault in New York bank?