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Stock market hype ignores inflation

 
Stocks markets have hit record (nominal) levels in the last few days, amid the on-going torrent of central bank currency injections into the banking system. Month-on-month changes in the US M3 money supply continue to show robust gains, with this money stock now at $15.1 trillion and some measures of year-on-year US house price gains close to 10%.

The Dow closed on Tuesday at 14,253.77 – breaking through the nominal highs of 2007, with the FTSE All-World equity index at four-and-a-half year highs. The key word is “nominal”: in inflation-adjusted real terms stock indexes in the US, UK and other countries have gone nowhere over the last 13 years – moving sideways. The volatility has offered opportunities for those with the cash (and the nerve) to buy at the bottom of the trend – think late 2002 or March 2009 – and to skilful traders, but not really for your average investor.

ZeroHedge has an interesting comparison of broad economic indicators from 11 October 2007, the last time the Dow was at current prices, versus today. Consider just the number of Americans on food stamps then and now (26.9 million then, versus 47.69 million today) and it again emphasises the…

Read the complete article at GoldMoney here.

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Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

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