I generally don't do purely economic diaries, because the only stock I've ever held was attached to someone else's shotgun.
It seems to me as an outsider, though, that folks who are wrapped up in the markets may be missing the forest for the trees. So here's a question for them: If the DJIA were to rally a whopping 300 points, or 3%, and on the same day the U.S. dollar fell 3 percent, would that really be a stock market rally at all? Or would it just be "inflation" of a sort being immediately priced into stock prices by those limber enough to leverage currency fluctuations?
It's been bugging me for a while when I vicariously check out stock diaries/threads. So I googled. And I found some interesting stuff. Read on.
This all started because I just wanted to see a graph of the DJIA indexed by a dollar index. As such I happened across an interesting
discussion on the merit of the USDX, an index which aims at using a "basket" to get a handle on the actual value of the dollar. The upshot: the USDX might be a tad bit overweighted towards other, also depreciating, currencies.
Most of the people who bother to think about the value of the dollar and then post about it tend to be among the "gold buggy" crowd. They use, of course, gold, to index the major averages. I'm not sure I want to base my assessment of the entire worth of the dollar on a single base metal, though, as we all know that market can be as emotionally driven as they come. However, I did find one article among this rife that seemed a geniune, thoughtful attempt at showing us what is really going on, by pure coincidence on the same site as the previous link, though you'll have to tolerate some adulation of paleocon Ron Paul, the poor guy who still doesn't seem to get that Republicanism no longer stands what he thinks it does, and never will again.
As you watch CNBC or other financial media, youu2019ll notice a great deal of hype about the fact that the Dow Jones Industrial Average (DJIA) is once again approaching the all-time high it hit in 2000. You also might witness the coverage about gold as a u201cmania marketu201d as it approaches its all-time high reached in 1979. However, neither of these analyses of the current situation takes into account the destruction of the dollaru2019s worth due to inflation.
The DJIA peaked at 11,722.98 in January 2000. As of 05/11/06, the price of the DJIA was 11,500.73 and the inflation adjusted price (CPI adjusted) for what this value would be in 2000 is 9,779.88. That is 16.5% below the 2000 peak and yet the financial media is ready to declare victory?
http://www.financialsense.com/...
That article makes use of the CPI. An older one tries some other measures, as they decry the CPI as not being entirely accurate either. Given that all their charts show either a plateau or a decline starting in 2000, it would be really interesting to see what they would look like updated.
And of course, http://shadowstats.com is always worth a gander, though most of their stuff is behind a pay wall.
All that searching and I still don't have a link where I can see any sort of daily chart for major averages indexed against any similar variable, but the voyage, as usual, was worth more than the destination.
In the end, I take a more philisophical view of things: money, even in the form of gold, is valued in proportion to the confidence we all hold in one's fellow man -- that our neighbors and not-so-neighbors will be worth trading with, rather than running them over and stealing their foodstuffs (and, that those that may offer us money, because they have it, got it by good business, not by running us over and stealing our foodstuffs.)
How many people do you know that, at this point in time, have a positive view of mankind and think they are getting a fair shake? I don't know many myself, and of course, there is no unilateral solution to that problem, unless you enjoy being run over and having your foodstuffs stolen.
You cannot run an economy on graft, lies, cheats, and inequality. All you can do is crash it.