Posted by: jhamon | May 31, 2009

19 Years to Nowhere

My mentor Astro Willie pounded several key concepts into my head; here are two of them.

First is his idea always to use “MGI” – Market Generated Information – or hard data, as opposed to opinions, which don’t pay well in markets.  Second is to take MGI and to transform it in such a way that you observe things others don’t .  A simple and effective transformation is a ratio.

S&P 500 in Real Money (Gold)
S&P 500 in Real Money (Gold)

Submitted for your consideration, a different way to look at the S&P 500 Index.  The idea is to adjust for inflation by dividing the nominal value of the S&P by the gold spot price.  As a store of value, gold represents “real money” and is a good way to capture the fall of the Late Great U.S. Dollar (click on thumbnail for enlarged image).

So: take the S&P 500 and divide by the price of gold.  What you get is an inflation adjusted value for the S&P 500.  CONCLUSION: In real terms, we are about back where were started in 1990, 19 years ago.

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Responses

  1. I like it! Keep the info (and opinions) flowing!

  2. Thanks for the encouragement, CH


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