Like Alice in Wonderland, when one peers through the looking glass, one can see different views of reality.
If one considers the performance of the S&P since the March lows in a strictly dollar based measurement, the return has been spectacular.
But if one looks at the S&P performance using the prism of a trade weighted index of the dollar's value versus other currencies, the performance of the S&P has been in good measure an illusion. See HERE.
This is just another example of how the debasement of a currency can create the illusion of wealth when in reality it acts as a wealth destroyer.
Stocks making the biggest moves before the bell: Apple, Intel, Alcoa,
Micron Technology and more
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These are the stocks posting the largest moves in premarket trading.
18 minutes ago
I wish the author of the graph had included the inflation-filled 1970s which included Nixon's three stages of price controls and the post-Vietnam weakening of the dollar. I may be wrong, but I believe that decade was the most inflationary of all decades since.
ReplyDeleteOK, I have to agree that asset appreciation w/o factoring in inflation creates an illusion that really hurts in the long run.
ReplyDeleteOn the other hand, the depreciating $ on a TWI basis makes our assets so much cheaper to those EU and other countries. So let'm buy our stuff. That's gotta be a factor in why stock prices (with the "illusion") have risen so much.
I just can't afford to go anywhere except Mexico. What's so bad about that? Heck, Sara Palen did just fine w/o a passport, didn't she? She could still see Russia from her back porch, I think.
Frankly, I'm not convinced the TWI $ depreciation has done that much damage...yet.
dan-