The Investors Dilemma (The Dow Jones Roller Coaster Ride)

The Dow Jones over the past three months looks like this:
Dow Jones Industrial Average Over Last 3 months

As you can see, over the last three months the DJIA has taken its investors for a ride, hitting the top of the hill at about 12,700 just before the end of July and then diving down the steep hill to rise to another small hill and then down the next steep dive.

The DJIA ended last week at slightly below 11,445 which was just about what it was at the end of 1999 (11,497).  So how then is the DJIA investor to gain wealth?  Well, unless you are a very big investor, i.e. Warren Buffet, or extremely lucky, or you have a very smart financial manager – you will probably end up either stagnant or at a loss.

So – should you invest in interest bearing accounts to increase your wealth? The best annual rate I can find for a regular savings account with a $1,000 minimum deposit is 1.11%.  No big whoop!

How about your house?  It’s making you wealthy, right?  Let’s take a look. Let’s say you live in Portland, Oregon and have owned your house since May of 2004.  So, let’s look at that seven year period.  S&P/Case-Shiller Home Price Indices puts the Portland index for May 2004 at 126.56 and puts the Portland Index for May 2011 at 134.50.  That’s a gain, right?  Right.  How much of a gain?  It works out to 6.27% over seven years or 0.9% per year.  That is less than the interest rate on a savings account.

The Dow is going down, interest rates are anemic, and the equity in your home has flat-lined.

What to do… What to do…

Hang in there!

What else can you do to build your wealth?  Ever heard of GoldSilver?

Let’s take a look at these staples.  What are they doing now?  Where are they going?

Silver:

Silver Prices

In that same seven year period we looked at home prices, let’s look at silver prices.  At the end of 2003 to the end of 2010, silver went from $5.97 per ounce to $30.63 per ounce.  It closed at the end of this week (8/19/2011) at $42.90 per ounce.  Let’s calculate the seven year interest rate equivalent.  Turns out to be 513.07% or 73.30% per year since 2003.  And – it’s gone up another $12.27 per ounce since the end of 2010.

If you owned the equivalent of the DJIA in silver at the end of 2003, you would have owned 1752.54 ounces of silver valued at $10,462.66.  Let’s also say you did not buy any more silver.  The value at the end of 2010 would have been $53,680.30 and today $75,183.96.  That is $63,739 more than what the DJIA is now.

 Gold:

Gold Prices

Let’s do the same exercise for gold.

At the end of 2003 to the end of 2010, gold went from $417.25 per ounce to $1420.25 per ounce.  It closed at the end of this week (8/19/2011) at $1853.10 per ounce.  Let’s calculate the seven year interest rate equivalent.  Turns out to be 340.38% or 48.63% per year since 2003.  And – it’s gone up $432.85 per ounce since the end of 2010.

If you owned the equivalent of the DJIA in gold at the end of 2003, you would have owned 25.05 ounces of gold valued at $10,453.92.  Let’s again say you did not buy any more gold.  The value at the end of 2010 would have been $35,577.26 and today $46,421.16.  That’s $34,975 more than what the DJIA is now.

If you owned 1753 ounces of silver seven years ago or 25 ounces of gold you would currently have an extra $35,000 to $64,000 to use as an investment for a passive income producing business such as an apartment house.  You would have more freedom in your life.

It’s probably true to say that most of us did not do that.

Is the opportunity lost?      NO!

Why not?

  1. The dollar remains weak.
  2. The national debt still grows (predicted to increase $14 trillion in ten years)
  3. The unfunded liabilities such as Social Security, Medicare, and military spending are ten times our national debt.
  4. Our GDP (gross domestic product) continues to struggle.
  5. The supply for silver and/or gold is fairly finite.

The experts are predicting gold to reach $4,000 to $5,000 per ounce and silver $100 to $150 per ounce.  Not in its lifetime – in the next few years.

To increase our wealth, we should probably use our hard earned cash to buy silver and gold rather than letting stagnate in declining real estate, a fluctuating stock market and very anemic bank savings rates.

A very good book and investing in gold and silver is:

Gary

About Gary

I am retired, but not tired. I still want to be valuable to others. I know that others are valuable to me. After looking back on six decades, I have asked myself this question: “What do I believe?” My mind filled up. My heart started beating faster. My spirit soared. I post blogs to share what my mind is working on, what my heart believes would help others and, what my spirit is communicating to me. What do I believe, you ask? Decisions dictate your path In love, not hate In tolerance, not prejudice In health, not sickness In wealth, not poverty In kindness, rudeness In happiness, not sadness In encouragement, not discouragement In faith, not doubt In courage, not fear I have been and will be challenged in each one of these beliefs, but the biggest belief is to stay positive and not turn negative. This belief helps me maintain all of the others.

Leave a Reply