Stocks end at 12-year lows

It’s no surprise that the markets are dropping, but it helps to stay in touch with where it’s at in relation to historical reference.

Word on the “street” is that markets dropped because of worry about nationalizing banks.  Duh.  You think they would have been more concerned about this BEFORE they elected a socialist to the Presidency, but hey, I guess it’s too much to ask to be forward thinking beyond how good something feels.

The Dow Jones Industrial Average is very close to closing below 7000, which I think will be the equivalent to an opening of the floodgates. And as the suggests, we haven’t been this low in 12 years.  What it also means is that if you started investing 12 years ago, you’re back to zero.  Worse, if you started investing less than 12 years ago, you’re losing money.  This, however, takes no account for inflation.  

On the other hand, if you had taken your money and bought gold, you’d be far ahead of the game.  If you would have bought 100 ounces of gold on FEbruary 27th, 1997, you would have paid a (spot) price of $360 per ounce, or $36,000 for the gold (for simplicity, I’ve not accounted for any markup, as it varies with what gold you get).  Gold closed at $940 per ounce, or $94,000 in 1997 dollars.  You could look at it that you made 260% on your investment, but in reality, the dollar has dropped that much in value.  I’ll let you ponder on that a while.

Another thing I thought was interesting today is the volume of trades on the DJIA.  Look at this chart for today:

DJIA 2-27-2009

There are 2 charts above, one is the average and the bottom one is the volume of trades. Take a look at the last few minutes of the trading day.  Volume spiked while the average fell.  This means that many, many, many people waited until the very last minute to sell their shares. I’m hoping that this doesn’t mean something nasty is set to happen over teh weekend (like a bank holiday or nationalizing some banks, etc.).

– Rob

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