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Stocks Near All-Time Highs? BS!
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Last Wednesday afternoon, the press carried a slew of headlines that investors have waited seven years to read:
S&P 500 Reaches Record High... Market Eclipses 2000 Peak... Stocks at All-Time Highs.
As proud owners of certain stocks, the team at DailyWealth is happy to read these headlines. The problem with them, however, is that they're wrong...
Yes, the most popular stock benchmark in the world (S&P 500) has reached territory never seen before in nominal terms. If you'd bought stocks at the top of the market seven years ago, your account would now be showing a profit for the first time.
But there's a serious flaw with this way of thinking. It takes no account of inflation. Here's why: During the last seven years, the price of your health care, education, housing, gas, electricity, and even food has risen too.
Even though the S&P 500 may appear to be at the same level it was seven years ago, in real terms, you've actually lost a lot of ground in stocks. Using the government's CPI numbers to factor in seven year's worth of inflation, we produced the chart below, which shows the S&P 500 needs to rise an additional 20% to reach its 2000 high.
Now how about stocks vs. gold? Here's where it gets scary...
In the chart below, we've plotted the S&P against "real money"... gold. So how are stocks doing against real money? Break even? Not even close. Try a real loss of 60%...
There is a simple explanation for all this...
When the world’s central banks flood the world with liquidity and low real interest rates, the real value of our paper money declines against tangible “stuff” like gold, oil, and land. That makes the profits you take out of the stock market worth less and less.
To sum up, when you’re counting the chips you’ve won in stocks or real estate, make sure to count them correctly. Make sure to count them in gold. And if you don’t have your share, we’re in a long gold bull market, and it’s time to buy some.
Nowadays, it’s never been easier to do so.
Good investing,
Brian Hunt,
DailyWealth
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P.S. You know, it’s funny... back in 2002, we told people to load up on gold investments. Nobody would listen, and quite a few people thought we'd gone crazy.
Now, with gold above $650 an ounce, folks are clamoring to get in. That’s why we produced a free gold research report, Investing in Gold 2007: How to Make a Fortune in the Coming Gold Boom. To get your free copy of this report, click here.
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