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EconoMeter: Is Dow a good indicator of US economy?

Does breaking the mark, however briefly, mean good news ahead?


Friday, March 9, 2012

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Kelly Cunningham, National University System
Answer: NO

The presumed bull market of the past three years is simply “bull” in reality. Apparent gains are an illusion of nominal value, but in fact losses when adjusted for inflation. In other words, inflation has wiped out any seeming gain of asset or income value. The market’s "gain" largely resulted from a constant flood of monetary stimulus in all the various forms extended. The erosion of purchasing power of dollar in “real” terms has occurred to such an extent that investors actually lost about 10 percent of real value over the past three years using gold as the adjustment factor.