US STOCK MARKET meteoric rise only inflationary?
@redyellowblackdog (10629)
United States
May 26, 2007 10:46am CST
Comparing the US STOCK MARKET as represented by the DJIA to the US DOLLAR INDEX is a disquieting experience.
Suppose we overlaid charts of the DJIA and the US DOLLAR for over 1 year and then compared the percentage change of each to one another for several hundred intervals of time simutanously. Can you imagine what such a polydimensional chart might look like?
Here is an URL with such a chart.
http://fp1.centurytel.net/polydimensional/miscellaneous.htm
What the chart proves without doubt is that the DJIA is going UP while the US DOLLAR is going DOWN.
The question it raises and provides an indication of but no proof either way by itself is whether or not the current rise in US STOCKS is only inflationary.
That is, "Is it merely taking more dollars to buy the same amount of value in the US STOCK MARKET?".
What do you think is causing the rise in US STOCKS? Is it inflation or are US companies really worth this much more?
I think it is more inflation than anything else. What say you?
1 person likes this
2 responses
@efreddy (250)
• Belgium
4 Jun 07
There is some misary bull market (it means that stocks rise but when you correct with inflation you see another story) but over the years there's a real rise too ,when you compare to 2000 when stocks were overvalued you don't see that (the Dow jones stood lower in €! compared with 2000), when you compare to 1987 (20 years ago and even before the stock market crash that year) ,stocks are much more worth and it's not only inflationary.
1 person likes this
@redyellowblackdog (10629)
• United States
4 Jun 07
efreddy,
Very well put. What I'm afraid of is that the next 10 years will be more like now compared to 2000 than now compared to 1987.
The US money supply is exploding. The dollar is dropping like a rock. I can't understand why there is not more discussion of this in the business news.
@redyellowblackdog (10629)
• United States
4 Jun 07
" The price of stocks is what you pay,value is what you get. "
I like that. Is that quote yours? Do you want to be credited if I use it?
@efreddy (250)
• Belgium
4 Jun 07
I don't know what the next 10 years bring (nobody knows it) but I think it should be quite well,not 2000 because stocks have a better value now but I don't believe it should be so good as the last 20 years.
From 2000 to the end of 2002 we had (in the USA,in the european markets the decline goes on to march 2003 and when you compare the DJ to the €,the decline in the US is about the same )a bear market who correct the overvalued stocks to undervalued,since then we have a rise that bring the price of stocks again to normal values (maybe we are going again to overvalued but we even could go back to undervalued or both in the next 10 years),the stock market crash of 1987 was a correction in a normal value and the crash brought them to undervalued .
The price of stocks is what you pay,value is what you get.
@optionsguru88 (310)
• Singapore
2 Jun 07
Hi :
I'm equally concerned about the US stock market.
The stock market keeps rising but the bond prices were retreating, resulting in the 10 yrs-old bond yield hitting all time high a few days ago.
Let's see how the stock market react in a few months' time.
Yours Truly,
Tony Chai
a disabled trader
http://options4u.blogspot.com
@redyellowblackdog (10629)
• United States
2 Jun 07
Thanks, for the response. I'll run some data on 10 year bond yield tommorrow. Might be interesting. Tonight I'm too tired already.
@redyellowblackdog (10629)
• United States
2 Jun 07
At the same url as I posted in the original question has been added a chart comparing the DJIA to the 10 year Treasury Bond yield. I could not find 10 yrs-old bond yield in my charts.
The interesting thing about the charts is that there is way too much like corolation between the two recently. The first half of this chart shows a normal relationship between yeild and stock price. The last 1/2 of the chart they are almost moving together. As you said it will be interesting to see what breaks which way!
BTW: Like your web page. I'll check out more later.
1 person likes this
@optionsguru88 (310)
• Singapore
3 Jun 07
Hi :
Very impressed with your charts though I need to learn how to interpret it.
Do keep us updated on this development as I believe that would benefit a lot of stock traders in Mylot here.
Yours Truly,
Tony Chai
a disabled trader
http://options4u.blogspot.com
