You Can’t Please Everyone But This Suggestion Is Extreme

I received the following comment below today on an article published back in September: Sticker Shock – September’s Retirement/Brokerage Statements

simpson says:
December 5, 2011 at 1:01 pm
The stock market is higher now then it has been in the last 3 to 5 years so take you’re idiotic Obama-bashing rhetoric to hell where it came from. No seriously, go kill yourself!

Fortunately for me, I understand that humility is a trait of a good man. I also understand that all men make mistakes. The hard part is admitting your mistakes and moving forward.

Simpson’s assertions for the stock market are twofold: the three year change and the five year change. Let’s analyze each time interval separately.

The five year change based on today’s closing (December 5, 2011) of 12,079 is -4.15% according to CNNMoney.com.

If we adjust the stock market value five years ago for inflation, the actual market today would be 14,039. This would be a 13.8% drop in the value of the stock market.

So let’s move on to Simpson’s second case for the three year change which is up 40.19%.

If we adjust this for inflation, the stock market is up 23.5% or 7.25% compounded over this period of time. Not too bad of a return even after paying capital gains (long or short depending on the length of time that the stock was owned and assuming that the stock was sold).

What would the comparable rate of return over three years for gold purchased on December 5, 2008 be adjusted for inflation? A little over 29% or more than 3.8 times more than the stock market’s return.

How has Citigroup fared in the past three years:

General Motors:

General Electric:

Hewlett Packard:

So a closer examination of the Dow reflects a different picture than the market due to statistical outliers like Caterpillar (overseas sales):

and Home Depot:

If a statistical analysis is done that would include the effects of inflation caused by food and energy, stimulus, bailouts and POMO by the Federal Reserve, only an idiot would be in the stock market today. Make mine gold.

David DeGerolamo

Related Article:

The Fall and Rise of the NYSE

 

      
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Jeff Brodhead
10 years ago

…diversification is always wise, because I’m sure you’d rather use lead on zombies with axes, than wasting your gold.