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Dollar Hits Lows, S&P Hits Highs

Since the Dow just shot through 10,000 and CNBC had its usual celebration, I thought it was prudent to revisit the dollar/equity inverse correlation.  As the S&P 500 hit one year highs today of 1093.17, it is worth noting that the dollar was hitting its one year lows at 75.34.

Temporary Nominal Salvation of the S&P 500 via the Destruction of the Dollar

Temporary Nominal Salvation of the S&P 500 via the Destruction of the Dollar

Simple explanation: When you make the dollar’s buying power weaker, the nominal value of everything in dollar terms (including the largest 500 US companies) increases in nominal terms.

And for those of you who say, “nominal terms are all that matter, we are still up from the lows in real terms as well…”

My response is this: if you take the Dow Jones Industrial average and divide it by the cost of one ounce of gold in dollar terms, we are back to 1994 valuation levels on the Dow.

You can buy the Dow for 9.4 ounces of gold today...Congratulation America.

You can buy the Dow for 9.4 ounces of gold today...Congratulations America.

Thanks to ZeroHedge for showing me that this can be done on Bloomberg.

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Posted in Conspiracy, Economics, Markets, Media.

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Continuing the Discussion

  1. Risk: Flight to Quality or Just a Blip? | SurlyTrader linked to this post on January 29, 2010

    […] expect these large aberrations up and down in 2010 and possibly beyond.  Also, remember that the S&P 500 has had one big inverse relationship to the dollar for some time now.  The recent fall in the S&P 500 seems to have a lot more to do with the rise in the dollar […]

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