Dow, adjusted for inflation, is at 1966 level

From a VERY long-term perspective, this confluence of 40+ year performance of stocks vs. gold turns out to be a historical fluke. In the big scheme of things, Gold (as well as other strategic commodities) is the hare that was left in the dust by the tortoise. (Gold can sprint like few others, but it's notorious for taking extended naps.) Let's open the window and take in the panorama:

Gold's annualized returns through 2008, using average annual prices, starting from inflation-adjusted major nadirs:

1814 0.6% 1858 0.4% 1873 0.6% 1920 1.4% 1970 3.2% 2001 10.6%

Importantly, the past 4 decades (and even more so the 7 years ended 2008) vastly overstate Gold's historical performance potential -- which is a strategic warning flag.

Gold's returns through 2008, when starting from inflation-adjusted major peaks:

1844 0.2% 1864 0.2% 1896 0.2% 1934 0.9% 1980 -0.2%

Now the same spiel for stocks, using average annual prices adjusted for dividends, starting from inflation-adjusted major nadirs, through 2008:

1814 6.6% 1858 6.9% 1920 7.1% 1932 7.2% 1942 7.3% 1982 8.1%

Stock returns through 2008, when starting from inflation-adjusted major peaks:

1803 6.2% 1835 6.1% 1906 5.9% 1929 5.6% 1965 4.7% 1999 -1.9%

Apple trees make apples, plum trees make plums ...

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Tortoise
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Using your CPI reference (I used Elle's before), your 12/2008 price adjusted back to 1965 is only $3.71 [(869.75/35.5) / (210.228/31.8)] for an annualized return of 3.1%. Just pointing out that for once my math was OK... I think...

-Will

william dot trice at ngc dot com

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Will Trice

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