Chicago, IL

By A.B. Dada

—

My business partner sent me a text this morning as we work together on a big project: “The DOW is under $10k!”  I popped over to the web, checked, and realized he’s right.  Within 30 minutes, I had a ton of emails from people about it.

Guess what?  It doesn’t matter.  Even if you’re in the stock market, the dollar price of the DJIA, or the NASDAQ, or even gold or silver means nothing.  You may think it does, the mainstream press wants you to believe it does, and even your government wants you to worry about the value of the DJIA and other market indicies.  But in reality, they mean nothing.

What does a market index show?  Basically, it shows the current value of a bundle of stocks or commodities.  Over time, you can look at pretty little graphs that show this number going up or down.  Most investors want those graphs to go up.  This is what amateurs do.  This is what the sheeples clamor for: more upward movement!

But that upward movement means nothing.  It means that the specific number goes up.  It does not mean that the value in the investment goes up.  When the number goes down, it does not mean the value of the investment goes down.

You can believe what they’re telling you, and you can end up a sucker like the rest.  When the masses look at a simple number like the DJIA and think that up = good and down = bad, the powers that be have won.

I prefer to think of these numbers as useless except in a pool of comparisons.  If I buy an index fund that tracks the DJIA, I will look at the specific price I paid, in comparison to a variety of products.  What is the ratio of the DJIA to gold?  What is the ratio to the DJIA to a case of eggs?  How about the DJIA to a gallon of gas?

If I move to sell that same investment, I’ll compare the same ratio comparisons.  That tells me if my investment was profitable, or if it was a loss.  Imagine if the DJIA tripled in price in 1 year, and you had an index fund investment.  Wouldn’t you be ecstatic?  Now imagine if gasoline quadrupled in price in that same time frame, and food went up 1000%.  You might still be happy, but once someone points out that you actually LOST value, you might change your mind.

So stop watching the dollar value of anything — stocks, commodities, and assets.  Instead, create your own comparison chart based on things that matter to you.  When you do, you’ll have a better understanding of what is actually happening to YOUR economy, the only one that matters.  While you’re at it, throw in your annual salary and your weekly salary after deductions, and create new ratio comparisons to see if you’re making more money-value over time, or less.

Related posts:

1. Gold and precious metals pricing in 2009
2. G.U.N. Gold Financial Recap, January 6, 2009
3. G.U.N. Gold Financial Recap, January 2, 2009
4. G.U.N. Gold Financial Recap, January 7, 2009
5. The price of gold doubles! (Gold Market Recap March 28, 20The price of gold doubles! (Gold Market Recap March 28, 2006)06)
6. Have we seen the end of gold price increases?
7. G.U.N. Gold Financial Recap, January 5, 2009
8. Invitation to compare monthly budgets to gold’s price
9. Silver ETF warnings and the Gold Market Recap (April 5, 2006)
10. Buying gold and silver on eBay?