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