Rabu, 28 April 2021

Do Stocks Actually MAKE Money?

Money & Crisis

April 28, 2021

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Do Stocks Actually MAKE Money?

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Graham SummersDear Money & Crisis Reader,

Yesterday I showed you how inflation impacts a stock market.

As a quick review:

  • Many emerging market stock markets look as if they’ve been going nowhere for the last 20 years.
  • In reality, this is because those stock markets are priced in the U.S. Dollar ($USD) for U.S. investors. And most emerging market currencies have weakened against the $USD during that time period.
  • When you price those same Emerging Market stocks in their domestic currencies, they are skyrocketing due to inflation.

Today, I want to turn our attention to the U.S. stock market.

The U.S. stock market is priced in $USD. However, due to the Fed’s money printing and credit creation, the $USD loses purchasing power on a near monthly basis.

What is purchasing power?

Forecaster who predicted 2008: “Panic dead ahead”

altTextOne of America’s leading financial experts just stepped forward to warn everyday America’s about a looming threat to your money, your family and your retirement plans.

As he put it in a recent interview:

‘[What’s coming] may cause even more unemployment and the stock market could nosedive… but if history is any guide, those will be the least of your problems.

If I’m right, it’ll like have a much longer term impact your savings… your retirement account… the price of your home… how and when you travel… even your personal security.’

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It’s all here – free of charge.

Purchasing power is the proverbial “bang for your buck” — how much of something you can buy for a single unit of currency.

In the United States, one dollar today is worth only 4% of what it was worth in 1913. (The year the current Federal Reserve was founded.)

Below is one of the ugliest charts you’ll ever see. They don’t show this chart in school for good reason.

US Dollar Purchasing Power

As you can see, the $USD is one of the worst “assets” to own. Indeed, since 2000 alone it has lost over 38% of its purchasing power! And this is the asset we use to price stocks!

An Alternate Perspective

So, what happens when we price stocks in gold, an asset that accounts for inflation and which cannot be devalued by a central bank.

Buckle up, it’s not pretty.

The Stock Market Priced in Gold

Yes, you are seeing that correctly.

Priced in gold, instead of dollars, the stock market has gone NOWHERE for over 20 years. In fact, stocks are still DOWN 50% from their peak relative to gold in 2000.

So this begs the question… Do stocks even MAKE money?

I’ll answer that question in tomorrow’s issue.

Best Regards,

Graham Summers

Graham Summers
Editor, Money & Crisis

P.S. The purchasing power of the dollar is an absolute disaster — with no bottom in sight. Unfortunately, like the proverbial frog in the pot of boiling water, most people don’t have a clue about what’s happening to the purchasing power of their “fiat” dollars. Gold has always been one of the best hedges against this kind of devaluation. If you’re interested in adding physical gold to your portfolio, I’d recommend Hard Assets Alliance to do it. They’re one of the best sources for buying, selling and even storing your gold. (Full disclosure, we own a stake in the company.) You can go here to get more information on them and even open an account right online.

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