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August 18, 2010

Stocks Keep Crashing

Let's revisit a favorite exercise of mine... viewing stocks in terms of real money... because the analysis may be pertinent to our near-term outlook. Over the past decade or so, equities have been mired in a vicious bear market. The extent of this bear may not be so apparent in nominal terms. After all, major indexes eclipsed their 2000 highs before the 2008 liquidation. However, in terms of gold, stocks have suffered a series of crashes, none of which have been recovered:

Dow Jones Industrial Average in terms of gold - 1999

Dow Jones Industrial Average in terms of gold - 2003

Dow Jones Industrial Average in terms of gold - 2006

Dow Jones Industrial Average in terms of gold - 2009

Addendum: the 85% is measured from the 1999 high.

Dow Jones Industrial Average in terms of gold - 2010

The fifth crash of this secular bear market appears to be underway. However, not wanting to admit their mistakes, the masses continue to wish stocks higher while ignoring the sector that can return their money. Somehow I suspect they will catch on right about the time the Dow and gold reach parity. At that point, I'll be happy to trade my gold for their equities.

 

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