Saturday, April 30, 2011

The Stock Market, The Fed, Gold and the US Dollar: Are we really wealthier or is it an illusion?

The stock market hit a 3 year high yesterday and the big question for all investors is where do we go from here. Interest rates this week dropped most dramatically for 3 year Government Bonds, from 1.12% to 0.99%, raising yields for these instruments. The chart below shows this week's move. The actual percent change for these various instruments showed the 3 month yields changing 20% from 0.05% to 0.04%, followed by a 6 month move from 0.11% to 0.09%, as the Table below shows.

Volume yesterday was incredibly high for the Dow at over 325 Million shares traded. The spike up in Volume is very noticeable also on the charts as is shown below. Was this a blowout and capitulation? I think not. This market still has some legs left. And while you may be comforted by the move to a 3 year high in the stock market, don't be. Gold has continued to rise closing also at an all time high of $1563. As you can see from the charts below that Gold prices continue to climb and the all important Dow/Gold ratio continues to drop. You see while the move in the market may make you feel wealthier, your purchasing power has been simultaneously dropping as well. One could argue successfully that the inflated price of Gold have taken all your wealth away. Did you know that?

Buy a house today with Gold and let me know how many ounces it takes, compared to what you needed just 3 years ago. In the year 2000, The Dow was at 10,787 while Gold was at $237/ounce. Today the Dow is at 12,800 and Gold is at $1563/ounce. So the Dow gained 18.7% in those 11 years and Gold gained 544% over the same period. (Source: Wikipedia)

Here's a look at the almighty US Dollar's value over about the past 25 years in the chart below. You still feel wealthier with the stock market advance? I don't think so! Ponder these charts and your government's complicity in this. We need politicians that can't be bought by Wall Street and we don't need the Fed! They have messed up this country the past 25 years or so starting with the Reagan Presidency. Ever since then it has been down hill financially. It has been nothing but gimmicks and smoke and mirrors with the people's money. Tax rates before Reagan were 90% for the wealthy and the country was fine! Oh for the good old days! Here's the chart on the US Dollar.

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Anonymous Anonymous said...

It seems as though you are a supporter of Ron Paul. He has repeatedly requested that the Fed be audited and then abolished. I have been a Paul supporter for a few years now and seriously doubt that the USA we live in today will be able to handle his type of leadership, even though it is much needed.

10:11 AM  
Anonymous stock market said...

very good post, i was really searching for this topic as i wanted this topic to understand completely and it is also very rare in internet that is why it was very difficult to understand

thank you for sharing this.


Stock Market

4:01 AM  

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