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Michael Knox analyses the US economic climate

Discussion in 'The Economy' started by Simon Hampel, 27th Mar, 2008.

  1. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Inside Business - 16/03/2008: Michael Knox analyses the US economic climate

    Inside Business - 16-Mar-2008
     
    Last edited: 17th Sep, 2016
  2. The Stig

    The Stig Well-Known Member

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    That was very interesting. Thanks for posting Sim.
     
  3. AsxBroker

    AsxBroker Well-Known Member

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    Is the presenter the son of Alan Kohler???
    USD$1.10...Wow! That's a massive call.
    Bernstein(AXA) believe that US rates are going to rise at the end of the year and ours (Aussie) are going to drop end of year.

    Cheers,

    Dan

    PS Before making an investment decision speak to your FPA registered Financial Planner.
     
  4. Tropo

    Tropo Well-Known Member

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    The Illusion of Dow Wealth

    Interesting reading.;)

    The Illusion of Dow Wealth by Sam Seiden

    Do you receive your monthly statement from your investment broker and smile each time you see the rise in the equity value due to the Dow making new highs month after month?
    This gain in wealth is an illusion second to none because there is one important number that is missing from your monthly statement.
    It is the REAL value of the Dow after factoring in the collapse of the U.S.

    Dollars Global Purchasing Power Parity.
    What the United States public sees each month is the value of the Nominal Dow which is an illusion of wealth.
    Let's do the Dow "Real Money index" reality check. How we do this is take the Dow nominal value which is what you see in your monthly statement and multiply it by the U.S Dollars trade weighted index.
    Before we do this however, please make sure you're sitting and prepared for a disturbing piece of reality.
    In 2000, the Dow top was 11,700 nominal times 1.24 which was the dollars trade weighted index. This equals 14,508 Global Purchasing Power Parity (GPPP) points.
    In 2007, the Dow at 13,500 nominal multiplied by a dollar index of .81 equals 10,935 GPPP points. 14,508-10,935 = 3573 points divided by 14,508 = 25% real constant stock market decline!

    Despite its recent eclipse of 14,000, the Dow (after accounting for the collapse of the U.S. Dollar) now buys more than 30% fewer Euros than it did back in 2000 when it was priced at approximately 11,700.
    It also buys 35% fewer gallons of milk, 40% fewer bushels of corn or wheat, 65% fewer ounces of silver, 70% fewer barrels of oil, 80% fewer pounds of copper, and so on.
    Do the simple math and figure out what the Dow will buy today in terms of other necessities such as housing, insurance, college tuition, or hospitalization.
    Anyway you measure it, Dow value that most Americans view as great wealth today is worth far less than it was in January of 2000.

    What about the NASDAQ real money "invisible" crash? Let's do the math:
    NASDAQ 2000 Top: 5000
    Dollar Weighted Index: 1.24
    5000 X 1.24 = 6,200 pts

    NASDAQ 2006: Top 2,500
    Dollar Weighted Index: .81
    2,500 X .81 = 2,100 pts
    6,200 – 2,100 = 4,100 GPPP pts.
    Divide this by 6,200 at the peak and we have a decline of 66% in real money terms. This is reality!