“YOU AIN’T SEEN NOTHING, YET”
“GOLDRUNNER–DOW STOCK CRASH!!!- PART 2”
PRICE VERSUS VALUE
The concept of “value” is extremely important, especially when Dollars are being printed aggressively. This is because the value of your Dollars is falling. Most people look at a Dollar and see a Dollar. They don’t understand that the worth of a Dollar can fall dramatically in times like today.
The chart, below, contains 4 different charts. I wanted you to see the relationship of all 4 charts to each other. Thus, to make it simpler to understand, I have placed lines for each chart in the same color so you can see each chart’s trend and trend magnitude, up or down. The 3 charts in the main frame are:
1) The “price chart of the Dow Stocks” in Black. (Black directional line)
2) The “value chart of the Dow Stocks” in Red. (Red directional line)
3) The chart of Gold. (Gold directional line)
4) And all by itself at the bottom is the US Dollar Index in Green. (Green directional line)
(Please note, and we will get to it in later Parts, the Dollar Index showed ~ the true losses in the value of the Dollar from 2002 into 2007; but from 2008, on, it no longer does so. We will discuss the reason in detail in later Parts.)
US DOLLAR INDEX IN GREEN
We can see in the Dollar Index in green at the bottom. The US Dollar Index started to fall as Dollars were aggressively printed in 2002. The Dollar Index fell by about 60% into 2008, meaning that each Dollar you own fell by 60% in Value. This generally means, not only the Dollars you hold, but most everything priced in Dollars like your savings account, your Bonds, your life insurance policy, your Social Security, your pension benefits, your Dow Stocks, and the list goes on.
DOW STOCK “PRICE” IN BLACK
We can see that the Dow Stocks, DJIA, fell from 2000 into 2002, but rebounded as the huge numbers of Dollars started to be printed. The Dow “price” was volatile, but it rose to new highs, and it is higher today than in the year 2000. (Price rose overall.)
DOW STOCK “VALUE” IN RED
We can see that the chart of the Dow Stock “Value” fell in a waterfall decline all the way from the year 2000 to today. We have had a small bounce, but even that is untrue as we will show in Part 2 of this series. Thus, the “value of the Dow Stocks” HAS CRASHED, but the SILENT CRASH in Dow Stock Value cannot be seen on the Dow Stock Price charts that everybody looks at. People are looking for a “CRASH in the DOW Stocks, but most of it is over- they missed it because the crash was in terms of value, not in terms of price.
DOW STOCK CONCLUSION
The Dow Stocks generally rose in “price” from 2000 to today. Yet, Dow Stock “Value” has fallen about 80% in that same time period. This fall in Dow Stock “Value” is due to the fall in Value of the Dollar that the Dow Stocks are “priced in, or denominated in” as more Dollars were printed. In 2007 many investors looked at their brokerage end of month sheets to see that they Dow Stocks were up versus in 2000, and they were up in price– yet the “value” of those same Dow Stocks- the value of their purchasing power was DOWN by around 30%, not up. Today, the Dow Stocks are still “up in price” by about the same amount as in 2007, but they are NOW down about 80% in terms of value versus the year 2000. This is because of continued Dollar printing causing further Dollar Devaluation. And it is not over, yet. From here, forward in the late 70’s the Dollar was devalued another approximate 65%, but it could be more this time around. So, the fall in the “value” of the Dow Stocks could be another 65% from here, and like the last several years, very little of it might show in the “price of the Dow Stocks.
The Fed is not done printing so the “price of the Dow” will likely remain relatively high, but the Dow Stock Value will continue to fall. Afraid of a Dow Stock Crash- you already missed most of it! The Dow Stocks have already crashed! This is because the value is already down about 80%. Thus, if it crashes another 65% of the 20% of value left, that is only about 13% to go. We are nearing a huge buying opportunity in the Dow Stocks over the next few years. THE DOW CRASH WAS A SILENT CRASH- A CRASH IN VALUE, NOT IN PRICE. Yet, the value of the Dow Stocks will continue lower as we will show in later Parts.
TODAY EVERYBODY NEEDS- VALUE! VALUE! VALUE!~!
Gold essentially holds relatively constant value at all times. Its price rises or falls based on the value of the US Dollar it is priced in, in the USA. Thus, today, we can see that Gold is up about 700% in price since the year 2000. This is due to Big Money and Smart Money and Central Banks buying Gold for its intrinsic value because the US is, and will continue, to aggressively print and devalue the Dollar.
Look at the chart of Gold in Gold color. Gold has risen in price in a pretty straight channel from around the year 2000 to today. Gold rose from around $250 up to $1920 in 2011. Gold moves in price opposite the value of the US Dollar because big money and Central Banks buy Gold when the Dollar is being aggressively printed and devalued. Gold is “up” about 700% in price since 2001 with Gold trading around $1700 as we speak. Many major investment houses have been telling investors something like “Don’t buy Gold- it doesn’t pay a dividend! Well, in 2000 your choice was to buy Gold and be up 700% today, or to buy Dow Stocks and be up around 13.5% plus a few measly dividends. What would you have done in hind sight? Don’t trust anybody. Think for yourself.
The Dollar printing will most likely not only continue, but will accelerate like the late 70’s. It has to in order to devalue a huge percentage of the debt like it did in the late 70’s. You see, “fixed debt” is devalued as the Dollar is devalued, just like your savings is devalued because the US Debt is also denominated (priced) in Dollars. That is the real reason the Dollar is being aggressively printed and devalued- to devalue the debt. If so, then Gold will be going dramatically higher. If so, then Silver will be going dramatically higher. If so, then good quality Gold and Silver Stocks will be going dramatically higher.
Yeah, when “price and value diverge”, things are pretty messed up! Let’s go back to Richard Russell’s challenge from the first paragraph, “…that just keeping the same value of one’s savings would be an important goal.” If the value of the US Dollar is down 60% since the year 2000, then you HAD TO have gains of 150% for your savings to stay even in its value, or buying power. The truth is that the value of the Dollar is down more than 60% since the year 2000, and it is going much, much lower. When we say “savings” we are talking about savings accounts, money market accounts, stock accounts, life insurance policy values, life insurance policy death benefits, bonds- just about every investment you have. The only investments that have kept up, or even outperformed the Dollar losses are investments that have high intrinsic value in the minds of humans. One example is Gold. Another example is Silver. We will expand upon many of the thoughts, above, in later Parts.
Goldrunner maintains a subscription site covering Gold, Silver, and the Gold and Silver Stocks at GOLDRUNNERFRACTALANALYSIS.COM. He is also anticipating the start of a new free and public blog Fractal Letter via e-mail the week of Labor Day. If you are interested in The Fractal Letter, you can send an e-mail note to [email protected].
For the moment,
Please understand that the above is just the opinion of a small fish in a large sea. None of the above is intended as investment advice, but merely an opinion of the potential of what might be. Simply put: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions. In the interest of full disclosure, GOLDRUNNER is personally invested in the Precious Metals sector including various Precious Metals and other individual stocks. GOLDRUNNER reserves the right to modify or eliminate any or all positions at any point in time.