Mohacsy's Safe Portfolio Member Forum

[santafe2]

Regarding the chart, I have the following observation: While it's great that the chart is log based, it doesn't take into account what it's really measuring - the value of stocks as they are measured in US dollars.

If the value of US currency was somewhat the same as it was in 1800 or even 1900 we could ignore this factor, but it isn't even close. While there wasn't constant inflation before the creation of the Fed in 1913, there has been a steady course of dollar devaluation since that time.

My point is not to simply criticize the chart, it's to point out that the pointer to DOW 2100 or 3000 as a logical low is much, much too low given the unaccounted inflation since 1913. I don't have government stats before that time, but if they're available, those should be added as well.

Aggregate inflation since 1913 has been roughly 325%. That is, a dollar in 1913 is now worth about 31 cents. Many would argue that the real number is closer to 15 cents but we'll use the government's number for this argument.

Supporting document here:
http://www.minneapolisfed.org/community_education/teacher/calc/hist1913.cfm

If we discount DOW 8000 by 325% to account for it's value in today's dollars, the intraday low of 7392 was really a reading of 2291. While I'm not prepared to argue that 7392 will be the low of this downturn, it's much closer than the numbers in the chart.