Dow Hits Record High in Dollars, 20 Year Low in Ounces of Gold

New York SunThe Fiat Dow:

As the Dow Jones Industrial Average edges close to 14,000 let us just remark on the value of the famous index in ounces of gold. It may be that 14,000 is nearly twice the 7,949 at which the industrial average stood on the day President Obama was sworn. But what are we to make of the fact that the value of the Dow is actually lower today, having slumped to 8.38 ounces of gold from the 8.7 ounces at which it was valued on January 20, 2009?

We are by no means the first to ponder this point. There is a whole Web site that charts the Dow in gold.

Greece Default, Credit Default Swaps, and the Recent Stock Market Gains

Charles Hugh Smith thinks they’re related.

Stocks more overvalued than in 1929

Couple things. One, we haven’t seen a correction below the long-term trend line in the last 20 years. You have to wonder if we’re due for a bigger correction than 2008.

Two, we’re now well above the 2008 market levels from which we crashed.

Three, HS. The dot com era was even crazier than I realized.

W.C. Varone on gold, guns, and food

“The thing about being a survivalist kook and stockpiling gold, guns, and food is that there’s no downside. Even if you’re wrong, you’ve still got gold, guns, and food.”
W.C. Versone

Heh. I love me some guns and we’ve been buying extra canned goods, staples, batteries, and such, just in case. As far as the yellow metal, I’m glad I bought some gold (in my 401K) when it was at $750 an ounce. Today it’s at $968.

I’m also glad I stayed almost entirely out of the stock market for the last five years*. The Dow Jones and S&P 500 look like this after being beaten down to 10 year lows

I might be interested in buying stocks when the Dow and S&P numbers start with a 6, or preferably a 5, but not when they start with a 7. Mish maintains and I agree that stocks are still too high. Even as low as they are now, they’re still too high. If you’re waiting for them to go back up you need to realize that they’re going to fall even lower than they are now.

I’m very happy right now to have Treasuries, TIPS, the Vanguard U.S. bond index, cash, and gold in my 401K, and I’m not so sure about the bonds anymore. And as always the best investment is to not go into unnecessary debt. You can do that by living below your means instead of above them. Learn to appreciate value and love the bargain.

* That’s not counting my EarthLink shares from that damned IPO a decade ago last month, back when we were in a dot-com bubble instead of a real estate bubble. The shares are only worth about a third of what I paid for them (though about half of that money was from shares I was given as an early employee of Knoxville-based U.S. Internet). Get this, though. EarthLink has been wildly profitable for the last two quarters. Their P/E ratio is 4 to 1!!!1!!one!!! You can buy the company for just four times its annual earnings for Pete’s sake, in contrast to the dot-com era when companies that had never once had a profitable quarter were trading at 50 times EBITDA or sales or some other bullshit metric. There’s no way in hairlipped hell I’m selling now. Someone is going to come to their senses and buy this stupid thing while the buying’s good.