Dow Hits New All Time High, But Not In REAL Terms (DJIA/M2, DJIA/Gold vs. $DJIA)

The Dow Jones Industrial Average (DJIA) hit a new all time high today in nominal terms. But when priced in the diluted money supply (M2) and gold since 1999, the Dow is still down significantly in real terms. The Federal Reserve has been propping up asset values and stock prices ever since the secular bear market began in 2001. And let's not forget that asset prices still crashed in nominal terms in 2008 and 2009 because of the epidemic of mispriced risk in the system and the deleveraging cycle. So manipulating asset prices via the money supply doesn't always work out in the end. Or maybe the Federal Reserve and other central banks should stop betting against the sunspot cycle. I guess you could say that the Federal Reserve did a good job of preventing a deflationary collapse in prices since early 2009, but the market is still just an illusion running on the manipulation of money and interest rates. Something has to give in the end I'm assuming.

DJIA vs. DJIA/M2 and DJIA/Gold

Source: St. Louis Fed (FRED database)

The cyclical bull market turns 4 on March 9, 2013.



  1. i knew it. i just frikkin knew it. but how best to recognize when the market is about to turn? how best to recognize when the market realizes how overpriced it actually is? I am a senior finance major, and I was trying to find an Libor/OIS Spread chart against yesterday's high, and stumbled upon this website! excellent post. you know, and I know (very little lol, but anyway...) and some other people know, but yet the majority of the market does not seem to know or want to believe what your charts above show to be true. very interesting. very interesting indeed.


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