Punchinello’s Chronicles

March 2, 2009

The DOW and Media Misdirection

Filed under: Butterfly Wings — Punchinello @ 3:17 pm
Tags: , ,

A couple of important economic events took place over the weekend of February 27-28, 2009. It seems that more often than not, lately, these kinds of big events are almost engineered to happen on the weekends. Maybe it’s because the trading markets are closed?

One story was that Citibank was going to be more involved with the federal government. Another was that AIG, the world’s largest insurance company, would be getting another $3o-billion in bail-out help. That makes the fourth injection of government money to help keep the company stable.

Between those discussions was the news that Iran has enough nuclear material to actually make a bomb. And, of course, there were more hints and rumors about the federal government nationalizing the banks to one or another degree.

This April 15, when you finish doing your taxes, you’ll need to add one more number. When you’ve figured out all your payments, after all deductions and all the math, you’ll have a bottom line number. That’s what you owe. And to that number, simply add $15,000. That’s what you owe in order to pay for the stimulus package, TARP, and all the other money the government has just handed out.

Just add $15,000 to your tax bill and write a check.

The markets today have continued right into the ground. The DOW closed at 6,763. The media is reporting that this is the “first time in 12 years that the market closed below 7,000.” They tell us that this is the lowest it’s been since 1997.

Oddly enough, this doesn’t sound all THAT bad, with it being only 12 years, right?

But what about inflation? Is a 6700 average in 2009 the same as a 6700 was in 1997? How much has inflation diminished the value of a dollar in those 12 years?

What if we hear that the markets are closing at the lowest level since 1965? Do we look only at the numeric value of the closing, or do we need to consider inflation-adjusted numbers?

According to an online inflation calculator by CoinNews.Net, based on the Consumer Price Index, the reliability of which I don’t know is true, we’ve had a 31.6% increase in prices between 1997 and 2009. That means that an item I buy for $6,763 in 1997 would cost me $8,897 in 2009.

Working the subtraction, that means we’d have to remove an additional $2,134 in order to arrive at the same price back in 1997. Okay, so do that subtraction, and if I’m reading this right, then the actual adjusted DOW average for today would be 4,629. That would put it at September 1995, fourteen years ago.

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1 Comment »

  1. I was saying this 2 years ago ..
    Dow 2000.
    that’s the bottom.
    everything has been talked about
    And by the way,
    what are these tracks we are standing on
    and why is that light coming at us ?
    All good questions.
    joezop : ) nothing but love

    Comment by joezop — March 2, 2009 @ 3:53 pm | Reply


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