Friday, February 3, 2012

NAS Hits 11 Year Highs? - Yeah, Right!

I saw something scroll across the old TV screen this morning that kind of made my blood boil just a little bit.  It was a scrolling text that appeared on BNN which said "Nasdaq Hits 11 Year High".  Now normally BNN, which is by far the best Business News Network on the planet that I'm aware of, doesn't get into very much cheerleading.  And when declaring that the NAS had hit an 11 year high... in nominal terms they were telling the truth.  But a headline like that just infuriates me because it's designed to give the impression that the equities markets are doing real, real well.  They aren't!  I decided to demonstrate that fact by showing how the equities markets have performed in real terms during those same 11 years.

In the chart below, we take a look at the NAS 100 as it has performed relative to real stuff... some of which are things that we use for our day to day activities and indeed our very survival.  I would have preferred to have been able to have included more commodities but unfortunately StockCharts does not yet offer commodities charts.  So we'll have to use the $CRX, which is an index of commodities only related stocks as a proxy for the broader commodities markets.  Some will argue that gold and silver shouldn't be on the chart either.  But I would ask those people this question: "11 years ago would you rather have purchased $100,000 worth of shares in the NAS 100 or $100,000 worth of gold bars?"  End of discussion.  We move forward.

The weekly chart below goes back 11 years, and we examine what has happened with the price of various asset classes since that time.  All of them begin at zero:

Click  here for a full blown live and updating version

And sure enough, just as BNN reported, the NAS 100 has indeed returned to it's price of 11 years ago.  It has regained all the losses it had incurred since late 2000, which is actually a bit more precise than the 11 years claimed by BNN..  In any event, the bottom line is that the NAS 100 has gone nowhere in the past 11 years except to have made a round trip to hell and back.  After 11 grueling years, it is now FLAT.  YAY!

In the meantime, during that same period West Texas Intermediate is up by a whopping 247%.  Had an investor purchased $100,000 worth of NAS shares back then, he would now have all that money back.  WHEW... that was a close shave!  But it kind of makes a person think, "Geez, I kind of wish I'd bought oil instead."  And why not, because that same investment would be worth $247,000 today.  Let's not even talk about silver.  On second thought... let's.   Had that same investor purchased silver instead,
he'd be sitting on an investment that parlayed his $100,000 into a small fortune worth $639,000.

So here's the bottom line:  had an investor purchased any of the following asset classes instead of equities, he'd be one heck of a lot better off.  Here's what an investment of $100,000 would be worth today had the investor purchased:

                                                                 Heating Oil                                 $234,000                       
                                                                 West Texas Intermediate            $247,000
                                                                 Commodities stocks                  $309,000
                                                                 Copper                                         $335,000
                                                                 Gold                                             $545,000
                                                                 Silver                                           $639,000

In other words, in the past 11 years, when compared to the same asset classes, all of which are "real things" except for the commodities stocks, here's how the NASDAQ 100 has stacked up:

                                  WHEN COMPARED TO THE COST OF:                 NAS 100 HAS LOST 
                                                Heating Oil                                                            -57.26%                   
                                                West Texas Intermediate                                       -59.51% 
                                                Commodities stocks                                             -67.64%  
                                                Copper                                                                   -70.15%
                                                Gold                                                                       -81.65%                   
                                                Silver                                                                      -84.35%

NOTE: Gold is not shown on the chart due to limitations imposed by StockCharts by limiting the number of indexes that can be included on one chart.

In fact, when compared to any asset class that is made up of real goods, all the equities markets show the same shockingly poor results.  How much does that pound of coffee cost you today compared to 11 years ago?  That box of cookies?  A pound of ground beef?  As I have uttered in several other articles that expose how dismally equities have actually performed in real terms, "No folks, when the equities markets are soaring, you are not getting your money's worth.".

For anyone who might be interested, here is a list of some of those studies:
The Copper Canary 
$CRX - Beginning to Rumble
Oil Confirms the S&P 500 Lost Decade

On a side note, for those who might also be interested in seeing an honest "no agenda" business network in action, here's a link to the video library at BNN.  Every segment of their entire programming day is available approximately 45 minutes after it has aired live in Canada.  There are often some wonderful guests who, when asked a question, are allowed to answer it in full, without interruption and given all the time they need.  Quite refreshing compared to the usual media spin machinery we see in other nations.  It's a fun day when Mark Faber is invited into the studio and sits in the guest commentator spot for a full two hours, offering his perspective on each story after it is told.  The most refreshing difference between the Canadian anchors and those from other business networks is that when they ask a question they want to hear the answer just as badly as viewers do.  Therefore, plenty of time is allowed for the guest to answer it in a cordial discussion type of format.  I've introduced the BNN video library to many of my American friends and to a man they are in awe of the classy, dignified and respectful way BNN operates.  And as an added bonus, surprise surprise... we get a lot more valuable information that way.  Try it out!



  1. I wish I had known to buy some silver and gold 10 years ago, instead of putting the fiat money for a stinking few % in a bank. Great post. The reason why equities lose so much value overtime, it is because it always get spinned to rise and rise, like now. Just to pop every few years.Greed always gets in the way when stocks can only rise, no one wants to sell, until it dropped so much they capitulate...rinse and repeat...Buy and hold is dead, now the bots have a holding period of seconds....Huge ponzi, but no one is going to jail....

  2. What a difference a week makes.  The Fed was prepping the markets for QE 3 a week ago.  Now its time to question their
    intention.  Is QE a way to fight deflation.  Or is it a way to devalue a country's currency ?   Artificially keeping short term
    rates low WILL  cause inflation.  See Greenspan 2002-07.

    The deflationary forces are apparent.  The BDI, Nat Gas, Unemployment, possible Euro recession.  Whats going to win out..inflation or deflation ?   What is a poor schmuck  to do ?                                                                   

    Watch for a changes in the landscape.   Watch the spread between the 10 yr and 30yr gubberment bond,  watch tips,  watch the CRB index and watch the dollar.  Major forces are at work here and the outcome will affect all major markets.

  3. I did buy some silver... 20 years ago.  Average price $7.40.  There are only two problems.  First, I didn't buy enough of it.  Second problem... I sold half of it at $35.

    You're not kidding about the demon bankers getting away with murder.  How about this guy, Sir Fred Goodwin, a corrupt, criminal banker who was recently reprimanded for his sins while holding the position as chief scumbag at Royal Bank of Scotland.  His penalty for gross incompetence?  He was stripped of his "knighthood"!  Can you believe that?  He should have been stripped of his manhood.  Obviously the requirements for becoming a "knight" in jolly old England, have changed.  One no longer need be honourable and chivalrous as in days of yore in order to be knighted and gain all the privileges that title affords.  He only needs to be a criminal who is willing to do anything and everything required to screw the unwashed masses.  Knights of old would have slayed a man like Goodwin.


  5. Interest rates can go higher in inflationary times ( Paul Volcker ) and debt deflationary times (Italy et al ).
    Bottom line is, i think, the deflationary needle as measured in interest rates has gone as long and as far
    as it can go.  

    I'm not trying to call a top in bond prices.  The Fed, however,  has IMHO  convinced the final hardcore holdouts that deflation WILL NOT OCCUR  while Ben is in charge.  Therefore i will start to accumulate TBT.

    Equities will continue to rise, but if i'm right, rising rates will eventually begin to slow the parade.

  6. You've got me thinking AR, since so many in the US oppose the idea of a gold standard, perhaps we down here should be shooting for a ground beef standard instead...

  7. Yeah, don't worry too much--I'm sure it'll be fleeting!

    I'm for any and all standards that don't involve currency monopolies.  The oil standard has the added boon of being perfectly suited to inspire a rash of post-apocalyptic themed movies with protagonists carrying around little vials of black gold.  Maybe the villain runs an evil vinegar factory and is obsessed with making the perfect salad.  Hmm, now it's starting to sound tangentially related to the ground beef standard too.  "And I would have succeeded too, if not for you rascally carnivores!"

  8. Whoa!  LOL... I'm gonna have to read this one again in the morning.