Treading water in the stock market for 80 years.

In 1929 the Dow Jones average stood at 329. In 2007 it went over 13,000. Great news for stock investors, and proof that investing over time works, right? Actually, it was sort of a hollow achievement and here’s why. The 1929 value of the Dow was equal to about 19 ounces of gold. Dow 13,000 a few years ago was also equal to about 19 ounces of gold. That’s nearly 80 years of standing still.

Of course, if your stock investment paid dividends you did make a little profit off that. VERY little after paying taxes on the capital gains. Wall Street loves to celebrate milestone numbers like 10,000 and 12,000, relying on the dazzle and flash of these stratospheric numbers to distract investors from the truth that playing in the stock market is not a winning proposition. It really is treading water.

Big numbers. Same value. Here’s a scary story. Back in 1980, a Zimbabwe dollar was about equal to an American dollar. Therefore, a billionaire in Zimbabwe was also a billionaire in the United States. Fast forward to today when almost everyone in Zimbabwe is a billionaire and most can barely afford a pack of chewing gum. Their currency is little more than worthless scraps of paper.

What happened? Runaway inflation, my friend. Runaway inflation. No wonder the federal government won’t report the TRUE rate of inflation in this country but, instead, publishes a pale little reflection that is primped and posed like a runway model to make us all marvel that the number is not worse than it is.

Note to the wise – that number is MUCH bigger than what they say.

 

Flickr / NeilsPhotography