Tuesday, February 21, 2012

DOW 13,000! Time to party?

In a word, no. As the chart below shows, although the Dow has gone up nominally (in numbers) it has not gone up relative to real inflation reflected in the price of gold.

What's the lesson here? As western economies continue to print, gold has remained the best hedge. Keep in mind however, equities (stocks) are still better at hedging inflation than bonds or cash which pay you next to nothing.

If you have money in a 401k, stocks are going to be one of the few choices you have to keep up with inflation. You can still hedge that money in your plan by buying some gold outside of your plan

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