StockFetcher Forums · General Discussion · A Rude Awakening...<< >>Post Follow-up
48 posts
msg #58760
Ignore astroanalyst
1/5/2008 1:35:06 PM

I recently read an intersting article in SFO Magazine about the effect of the devaluation of the dollar that blew my mind and thought I would try to paraphrase and pass along the gist of it to those of you whom might be interested...

1. The Weak Dollar Matters

"...While most may have heard or read about this, many don't realize we are fighting the economic conflict of our lifetime...Americans are blinded by the illusion of stock market wealth and purchasing power..."

2. The Illusion of Stock Market Wealth

When the weak dollar's Global Purchasing Power Parity (GPPP) is factored into recent Market activity, things get ugly...

In 2000, Dow top @ 11,700 X 1.24 (Dollar trade-weighted index at the time) = 14,508 GPPP "points"...

In 2007, Dow top @ 14,180 X .78 (Dollar trade-weighted index at the time) = 11,060 GPPP "points"...

Bottom line...a net loss of 3,448 GPPP "points" meaning the Dow has declined by 24% since 2000! When it comes to Real Money, the supposed 2003-2007 "Bull" Market is in reality a continuation of the 2001 Bear Market in disguise!

The NASDAQ, which has a long way to go to see 5000+ again, has declined by 66% in Real Money terms since 2000...

In terms of commodities, compared to 2000, the ailing dollar now buys...

- 35% fewer gallons of milk
- 40% fewer bushels of corn or wheat
- 65% fewer ounces of silver
- 70% fewer barrels of oil
- 80% fewer pounds of copper

and so on...This same formula can be applied to any number of other purchases, such as housing, insurance, education, healthcare, etc. yielding equally sobering results...

Couple this with the housing troubles and $100 dollar oil and things are looking pretty grim. Unfortunately, further easing by the Fed only makes things worse!

On that note, I find it ironic that one of the Fed's supposed priorities is to curtail any potential signs of Inflation. With their steadfast dismantling of the Strong Dollar Policy to appease the Street and give cheap money to "kids in the candy store", Inflation is now the least of our worries, IMO...

Despite the Financial Media "Talking Heads" parroting the worn out line about a weak dollar being good for exports, the fact is we are all about consuming and spending where the rest of the world for the most part is producing and saving. As a result, the purported export effect will have little impact, IMO...

3. What's an individual to do?

+ Start saving more
+ Buy gold, gold futures and/or a gold ETF when prices dip/retrace to opportunistic levels
+ Stop using your home as an ATM

Article ($2.99) Link :


318 posts
msg #58770
Ignore rtucker
1/5/2008 10:11:07 PM

Funny, yet scary interview with the great Jimmy Rogers. Tell us what you realy think about Bernake, Jim , ha...

Nice freudian slip where he says he is "short the homeowner". Oh, Oh...

22 posts
msg #58784
Ignore haskellb2006
1/6/2008 9:27:12 PM


If currency issues bother you read 'The creature from Jekyl Island'

It's a heavy read but a real eye-opener.

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