Thursday, December 24, 2009

21st Century: First Decade Recap

As the first decade of the 21st Century winds down, let's reflect on the worst ten financial years of most people's lives.

Despite a sea change at the end of our decade, from centuries of inflation to at least decades of, or perhaps centuries of, deflation, the domestic buying power of the US dollar tubed spectacularly. Over the past 10 years, all central bank-looted major currency pools have become flooded with new and improved, computer generated, extreme high leverage, ultra speculative, taxpayer insured, for-profit private paper issue. The story is much the same in corners of the Earth.

Robbed by the private Federal Reserve banks, our currency has experienced a catastrophic loss of domestic buying power in a single decade:
  • Gold buying power fell from $275 to $1100 per ounce, down 4 fold
  • Real estate buying power has fallen several fold nationwide, even after sharply deflating
  • Oil buying power is down almost four fold, from $20 to $75 per barrel, even after deflating from $150/br
By most if not all measures, the last decade has been devastating to an already over-extended consumer. Standards of living have been thrashed. Even after downsizing, families find Momma working full time to pay their debts. The kids work where they can help out. Advanced education is unaffordable to the bottom 95%, and those who borrowed to attend are headed to the poor house even faster then most. High paying, entry level jobs are a distant memory. 23% are unemployed.

The only bright spot in the opening decade of our Depression has been stocks:
  • The Dow has only lost 20%
  • The S&P500 is only down 30%
  • The NASDAQ is only down 55%
But that doesn't tell the story, for two reasons. The most obvious reason is the domestic buying power of the currency, we are still awash in phone paper, as discussed above. If you sold your Y2K portfolio into 2009 currency, that currency only buys 25% of what it bought in 2000. Adjusting for gold price, as a decent gauge of simple domestic buying power, we begin to see the real story:
  • The Dow is down 80%
  • The S&P500 is down 83%
  • The NASDAQ is down 89%
Unfortunately, that doesn't tell the story either. Indexes rotate, or cherry pick only the best prices at any given time. Bankrupt companies magically disappear. Too bad your portfolio can't ignore losses too. 8 of the 30 Dow components from Y2K were booted for turning into penny stocks. Several have turned over several times. The other indexes have performed even worse. Since the 1929 stock market high, only GE remains in the DJIA.

Historically stocks are a black hole for public money, that trend has only accelerated in the 21st Century. Unfortunately for most, the worst has yet to be completely imagined.

1 comment:

  1. FDR

    Lets say that your child or your grand child found your gold when you were taking a nap and took it outside and played with it with the dog and lost it.

    When would you buy gold to replace it?


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