Are Stocks Really Up This Year?

If you've turned on the evening news or picked up a newspaper, you would probably think that the stock market is doing great this year. And it has, if you price your stocks in US Dollars.

If you're comfortable pricing your assets in a denominator that can be diluted at the snap of someone's finger, then sure, your stocks are knocking the cover off the ball. But if you want to price your assets in REAL money, in a currency that cannot be "printed at will", then price your stocks in the oldest form of currency that we know of: Gold.

Priced in Gold, instead of in US Dollars, the Dow Jones Industrial Average is actually down Year to Date. On an absolute basis, the $DJIA is up about 4.5% for 2012. But meanwhile, $GC_F is up more than twice that amount:

And this is nothing new. Gold has been outperforming stocks for well over a decade. This secular trend, in my opinion, is stronger than ever. You'll see rallies in equities vs gold, plenty of them, but they're just counter-trend moves within a secular bear market.

And remember, counter-trend rallies are typically vicious in nature. We've seen a huge move in the Dow/Gold ratio since the August lows.  After its peak above 42:1 in 1999, the Dow priced in Gold broke below 6:1 at the end of this summer. Today we're right around 7.5:1 and I wouldn't be shocked if it went as high as 10:1, which is a historic average in this ratio. But none of that changes the fact that the trend is still down.

And this year's action has just been more of the same. Don't forget that.

Also See:

Talking Gold & Silver with Jeff Macke (January 4, 2011)

Tags: $GLD $DIA $UUP $DX_F