The Dow hits 7537!

The Dow Jones Industrial Average crossed the 10,000 mark yesterday, and some people are hailing it as a psychological breakthrough. But 10,000 ain’t what it used to be, as a blogger named Tyler Durden explains:

On a real basis (not nominal) the Dow at 10,000 ten years ago is equivalent to 7,537 today! In other words, not only have we had a lost decade for all those who focus on the absolute flatness of the DJIA, but it is also a decade where the US Consumer has lost 25% of purchasing power from the perspective of stocks!

“Real basis” in this case means the dollar’s strength relative to the six currencies in the U.S. Dollar Index (euro, Japanese yen, British pound, Canadian dollar, Swedish kroner and Swiss franc). So we’re not talking about mere inflation, but our currency’s weakness.

Don’t get me wrong: I’d much rather have the Dow at 10,000 than at 7000. But Durden’s analysis points to the fact that our weak-dollar policy — the product of both “benign neglect” of the dollar under President Bush and the Federal Reserve’s quantitative easing this year — has a real effect on American investors and consumers. If you bought a mutual fund indexed to the Dow the last time it was at 10,000 and sold it now that it’s back at 10,000, you could say that you’d broken even in nominal terms. But you’d be able to buy 25 percent less with your money now than you could have when you bought the fund.

And things aren’t looking up for the dollar in the short term.

Tight money during the financial crisis of the late 1920s helped turn a recession into the Great Depression. Too much easy money for too long after the 2001 recession helped create our current predicament. We’re about to find out what extremely easy money — I’m not sure anyone truly knows how much money the Fed has created over the past year — leads to.

37 comments Add your comment

Ezequiel Farré

October 15th, 2009
2:41 pm

Ojo que un Dow Jones de 10.000 puntos, equivale a uno de 7537 puntos de hace 10 años, pues el Dólar perdió paridad con respecto a otras monedas…No mirar solo el nominal…

Road Scholar

October 15th, 2009
2:44 pm

So Kyle, what are our present gas tax (state and fed) worth now since they haven’t changed in a while? So what should they have been raised to to keep up with inflation?

Jefferson

October 15th, 2009
2:49 pm

Tell my boss I need a raise.

Kyle are you always mad and depressed? Ever made the best of the situation and been happy with what you got?

Kyle mans up

October 15th, 2009
2:49 pm

Looks like Kyle is starting to man up and offer a direct challenge to the mighty Jay Bookman.

Can pay-per-view cage fighting be far behind, as a revenue producer for the AJC?

Will Cynthia Tucker take one for the team and participate as a ring girl, even if it does offend her feminist sensibilities?

Shaneeeeeeee Fananeeeeeeeee

October 15th, 2009
2:51 pm

President Corrupt had nothing to do with this, in fact he hasn’t done a thing except break promise after promise. “I will not raise taxes on the middle class.” – Obammy. That’s a lie. “No lobbyists willl work in or with anyone in my White House.” – Obammy. That’s a lie. “I will not sign a bill that come’s to my desk for 5 days so the people can review and comment on it on the White House website.” – Obammy. That’s a lie.

The Anti-Wooten

October 15th, 2009
3:32 pm

Shaneee on HerFaneeee certainly has a rant going there. Take a timeout with your nose in the corner.

The Anti-Wooten

October 15th, 2009
3:33 pm

Kyle,

Given the validity of what your op-ed statements when do you provide proper attribution for the mess?

Your great hero Ronald Reagan and his trickle down my leg theories are now fully home in their roosts?

Shawny

October 15th, 2009
3:40 pm

EXACTLY! Jay Bookman needs to read this. He doesn’t get the deflated dollar part. He wonders why conservatives don’t cheer the new 10k mark, and it is because it takes way too many dollars to buy enough shares to get it back to 10k. Dollars aint what they used to be, and the current administration and congress is pushing to make it WORSE. Fire them all!

The Anti-Wooten

October 15th, 2009
3:49 pm

Kyle Wingnut and the Wingnut Brigade sure must hate America and Americans. I’ll bet that you’d cheer for the Oakland As if they were beating the Braves in the World Series.

Kyle Wingfield

October 15th, 2009
3:57 pm

Anti-Wooten: You sure do spend a lot of keystrokes assigning love or hate of America to people. And asking questions that were answered in the original post.

The Anti-Wooten

October 15th, 2009
4:09 pm

Alright Kyle, I’ll use short words for you.

What Ronald Reagan made into the economic policy basis for all Presidential administrations since his time, with some minor course altering under Clinton are a straight line cause for what we see now.

When will you and all of his conservative cheerleaders own it?

The Anti-Wooten

October 15th, 2009
4:11 pm

As far as my keystrokes, I’m 92% accurate at 130wpm so it’s not a big loss of my time. Allows stream of consciousness posting.

The Anti-Wooten

October 15th, 2009
4:13 pm

Additionally, your regular response to my positional assignments must mean that I’m hitting pretty close to the mark. Something to think about?

Gramps

October 15th, 2009
4:57 pm

Hey Anti-Wooten – I don’t think you’re 92% accurate at anything you have typed on this blog.

Kyle Wingfield

October 15th, 2009
5:03 pm

Anti-Wooten: I didn’t know conservatives were trying to avoid Reagan’s legacy. And I didn’t know that Reagan passed the laws that pushed banks to make loans to people with little creditworthiness…or presided over the easy monetary policy that gave banks cheap enough money to get away with it for a while…or passed the Basel II banking accords that allowed banks to maintain thin capital ratios because securities backed by subprime mortgages had AAA ratings…or the SEC regulations that limited the number of recognized credit rating agencies.

Note that none of these actions represented deregulation — rather, they were bad regulations. And bad regulations and poor enforcement of our (still-extensive) financial regulations bear the brunt of the blame for our present condition. Blaming it on Reagan and deregulation is a simplistic view that doesn’t square with the facts.

Kyle Wingfield

October 15th, 2009
5:14 pm

As for my “regular response”…of course my answer is going to be the same, as long as you keep trotting the same ridiculous accusations.

Class of '98

October 15th, 2009
5:43 pm

Kyle, you are my new hero.

jt

October 15th, 2009
6:41 pm

Mr. Wingfield-

Good show on your Reagan defense.

Intown Lib

October 15th, 2009
9:35 pm

Kyle: you have really depressed me. Especially since I started investing in my IRAs and 401Ks and such in 2000. The stock market is a cruel joke for the individual buy-&-hold investor. And those financial advisors lure you in with models showing you 7% returns per year on average (over any several decade period). Well, this was the lost decade as far as I’m concerned. I’d have been better off in a low interest savings account.

TaxPayer

October 15th, 2009
9:49 pm

Kyle,

I don’t know about the 25% across the board loss of purchasing power. It’s all relative. For example, I doubt the dollar has even 50% of its former purchasing power when it comes to healthcare. Housing, on the other hand, is perhaps approaching parity with respect to ten years ago, at least in some markets. As for your sidelines, I’d like to share thoughts some time on the impact of the legislation that Phil Gramm slipped in on that fateful evening in December of 2000. I think that the deregulated derivatives market, in conjunction with lax oversight and lots of greed from many directions, had a very significant impact on our economy. For example, I leave you with this question: Where would we be today if all companies that sold the credit default swaps had been able to cover their ‘bets’ and if all the rating agencies had been doing their job and properly valued some of those outlandish CDOs. Clearly, we cannot regulate greed so what if we had regulations that at least kept that greed grounded in reality.

Michael H. Smith

October 15th, 2009
10:47 pm

Don’t look now Kyle but CORRUPT ACORN is probably going to regain backdoor funding under CRA and receive “enhanced funding” at that thanks to Barney Frank and HR 1479.

http://www.thehopeforamerica.com/play.php?id=2207

On the deregulated derivatives market it would help to note the role Alan Greenspan, Robert Rubin and Larry Summers all played in getting Congress not to regulate the derivatives market under the Clinton administration.

During the Clinton administration, Fed Chair Alan Greenspan, Treasury Secretary Robert Rubin and Deputy Treasury Secretary (now director of the National Economic Council) Larry Summers crushed an effort by independent-minded regulators to adopt modest regulation of financial derivatives. In 2000, Congress prohibited such regulation by law.

See Lessons from AIG at wallstreetwatch dot org

Michael H. Smith

October 15th, 2009
10:49 pm

Don’t look now Kyle but CORRUPT ACORN is probably going to regain backdoor funding under CRA and receive “enhanced funding” at that thanks to Barney Frank and HR 1479.

http://www.thehopeforamerica.com/play.php?id=2207

On the deregulated derivatives market it would help to note the role Alan Greenspan, Robert Rubin and Larry Summers all played in getting Congress not to regulate the derivatives market under the Clinton administration.

During the Clinton administration, Fed Chair Alan Greenspan, Treasury Secretary Robert Rubin and Deputy Treasury Secretary (now director of the National Economic Council) Larry Summers crushed an effort by independent-minded regulators to adopt modest regulation of financial derivatives. In 2000, Congress prohibited such regulation by law.

See Lessons from AIG at wall street watch

deborahinAthens

October 16th, 2009
6:46 am

Kyle, why is when Cheney was confronted about the danger of the falling dollar in an interview (taped) years ago, he said that a weak dollar was good for American companies because our goods could be bought overseas at cheaper prices, yet just a few weeks ago on one of the Sunday news shows he lambasted this administration about letting the dollar weaken? I told everyone that would listen in 2001 that George W. Bush’s policies would turn this country into a Banana Republic, and guess what? He did. So you guys should really think twice before you toss stones. You are depending upon the stupidity of your followers to fall for your rhetoric. Just remember, we aren’t all stupid.

Ga Values

October 16th, 2009
6:49 am

After 8 years of RINO control we are in better shape than we should be. We need to get back to basics and cut the size of government.

reebok

October 16th, 2009
7:56 am

Is this what the right has been reduced to? Fighting the perception of an improving economy to improve their prospects in the midterms next year and against Obama in 2012? That’s sad. But predictable.

David Axelfraud

October 16th, 2009
9:22 am

Kyle, sorry to change the subject on a great piece but I have to tell you this. I just read this crap that Cynthia Tucker wrote slamming WW2 seniors. This woman is the most vile piece of crap. If you want to know why people hate the AJC this woman is it.

Cynthia Tucker
Greatest generation becomes greediest generation

12:32 pm October 15, 2009, by ctucker

To placate cranky seniors, the Obama administration wants Congress to send out $250 checks to all Social Security recipients. The checks would be in lieu of cost-of-living increases, which SS recipients are not scheduled to receive. Why not? Because the economy is in the toilet, and there is NO inflation.

Stu

October 16th, 2009
9:24 am

The Anti-Wooten – What a putz. Clueless idiot. DeborahInAthens, you don’t know squat.

Let the food riots commence. All Hail The Federal Government – Our Master. We shall go down with the ship.

Hoover and Roosevelt fabricated the great Depression with their inane stimulus policies.

David Axelfraud

October 16th, 2009
9:24 am

The Anti-Wooten

October 15th, 2009
4:09 pm

Alright Kyle, I’ll use short words for you.

What Ronald Reagan made into the economic policy basis for all Presidential administrations since his time, with some minor course altering under Clinton are a straight line cause for what we see now.

When will you and all of his conservative cheerleaders own it?

Hey dimwit, Reagan grew an economy that had collapsed under your hero Jimmy Carter. Are you really that retarded to believe that Reagan caused all of this? Oh wait, yes you are.

David Axelfraud

October 16th, 2009
9:28 am

reebok, funny how you point the finger at conservatives when you and other ding bat libs were silent when the DOW hit 14,000. Unemployment is at 10% right now. When the DOW hit 14,000 unemployment was at 4.4%.

Can you do simple math?

Chris Broe

October 16th, 2009
11:23 am

Stock Talk: The banks took their bailout money and bought stocks. This climb to 10K is a rally of insiders. The volume is a little light.

Banks R trying to recoup losses from their ingenious paper derivatives.

buy stocks. there’s nothing that’s going to stop the market. There is more bailout money and stimulus money coming and it’s all going into the stock market. Dont fight the fed.

DannyX

October 16th, 2009
11:41 am

FOX NEWS BREAK……………

The Dow has lost 100 points today, as such Fox News will now once again officially refer to the stock market as the “Obama stock market.”

Go to FoxNews.com and sign up our “Instant e-mail Alerts!” When the stock market rises you will know instantly when to call it the “Bush stock market” again.

Stay tuned.

ohmy

October 16th, 2009
1:15 pm

a non-political op-ed…i agree with this…i also believe that the market has gotten to this point only because of bailouts. i’m afraid its a superficial gain and supported by little if any free and unassisted activity. we will see…

ohmy

October 16th, 2009
1:18 pm

por que no miramos el nominal?

Joan

October 16th, 2009
2:40 pm

Kyle: This is a thoughtful and useful piece. Unfortunately most Georgians aren’t well enough educated to read and understand it. As for liberals, if facts fail to fall their way–which they often do, well then the answer is simply “kill the messenger”, don’t deal with the facts. About the market–I think we will see 7000 shortly (but I guess that will mean it is really 5,000).

David Axelfraud

October 16th, 2009
3:41 pm

LOLOLOLOL. Kyle, maybe you should contact the numb nuts who posted a mistake on the front page of the AJC site.

Under Buzz it shows a shot of Mike Tyson and says: Tyson, Holyfield chew the fat on ‘Oprah’

LOLOL

Where’s Jesse Jackson???????? RACISTSSSSSSSSSSS

leeh1

October 16th, 2009
4:20 pm

The weak dollar only hurts if you buy something from overseas. Buy American, and you not only help keep jobs in the US, but you help our exconomy, too!

For too long in the bush administration, we wanted to fire american workers, and have foreigners make things cheaper to sell to Americans who now no longer have jobs. No wonder the dollar is weak! To make it strong, everyone should make america strong by keeping jobs here, cutting down on imports from cheap countries like China and India, and to buy American products.

Remember what the American eagle says: “Under my wings, all things prosper.”

Important News - Oct. 18

October 18th, 2009
12:07 am

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