Aussie Market (ASX) hits new high.
End of the week over here saw the S&P200 breach the 4300 level for the first time ever.
I'm beginning to get feelings of irrational exhuberence again.
Had a customer that came into the shop on Friday and purchased some SAI Global (SAI.AX) for a gain LIFO gain of 114%, now those are the sort of gains I like.
On the topic (can't remember who started it) of Survivor Bias which is something we should all become aware of. It is best illustrated by this list of DOW stocks from 1905 (100 years ago)
Amalgamated Copper
American Car & Foundry
American Smelting & Refining
American Sugar
Colorado Fuel & Iron
National Lead
People's Gas
Tennessee Coal & Iron
U.S. Rubber
U.S. Rubber first preferred (replaces U.S. Leather preferred)
U.S. Steel
U.S. Steel preferred
Now, these companies probably don't make up the DOW constituents today, the question is what happened to them?
We all are familiar with the graphs of the indexes rising inexorably over the century underlining the fact that we should be invested to make money.
If stocks are moved in and out of the index over the years to reflect current technologies or trends then one would expect the index to forever rise.
What would have happened to the DOW if the 1900 constituents remained the same, where would it have gone.
I read one very interesting website that said that the rise in value of the markets is merely a reflection of the loss of value of the dollar (how much did a postage stamp cost 10 years ago to the current price).
When the DOW is normalised to remove the effect of the loss in dollar it has essentialy been flat for more than 50 years.
Currency left in the hands of irresponsible people will cause asset prices to rise but with no 'real'rise.
I guess this is what Mr Core has been talking about for many years now when talking about gold v currency.
Luckily gold can't be printed and is finite, like most of earths resources.
Lets just hope we don't trash the planet for an illusion of gain.
Sorry for rambling.
Cheers
Neil
AI
