Thread: Stocks Hit New Lows Against Real Money

With one of the all-time great observations on the effects of inflation, Yogi Berra once said: “A nickel ain't worth a dime anymore…”
Yogi was referring to the declining purchasing power of paper money… and as today’s chart shows, the nickels we keep in the stock market are becoming worth less and less each day.

This chart is the performance of U.S. stocks measured in terms of real money. And by "real money" I mean gold. We see that stocks hit a bottom in 2003, and then began a rally. However, the price of gold has rallied much more. Gold has increased in price so much, that when we look at stocks vs. gold, we see stocks are at multi-year lows:
The S&P 500 vs. Gold (5-year chart):

There is a simple explanation for all this…

When the world’s central banks flood the world with liquidity and super cheap interest rates, the real value of our paper money declines against tangible “stuff” like oil, land, and gold.

And although our stocks have gained value in terms of dollars, when we take our profits and try to buy a tank of gasoline, a house, or a hamburger, we find our wealth hasn’t increased a dime. Rising oil prices have made gasoline more expensive. Soaring land prices have made hotel rooms expensive, with the average U.S. hotel room costing $90.