Tuesday, October 30, 2007

DJIA, inflation adjusted

The article speaks for itself: The Real Dow


Inflation adjusted return for Dow Jones Industrial Average is 1.64 percent compounded annually.

The following paragraphs are enough to induce humility in an irrationally exuberant investor:

"To illustrate: the Dow averaged 985.93 in 1/66, and 4746.76 in 9/95 = 4.81 times higher; the CPI-U was 31.8 in 1/66, and 153.2 in 9/95 = 4.82 times higher; thus, the Real Dow for 1/66 and 9/95 are very nearly equal at 46.4 (see plot). This plot is directly inspired by the 3/30/99 publication of such a plot, titled “Dow, Inflation Adjusted”, by The Wall Street Journal (in article “The First 10,000 Points. How It All Adds Up to 10000”, page C14); the agreeing overlay of the two plots is here with quoted text."

"Again to illustrate: the Dow averaged 985.93 in 1/66, and it was nearly the same 16.75 yr later, = 988.71 in 10/82; but the CPI-U increased from 31.8 in 1/66, to 98.2 in 10/82 = 3.09 times higher; thus, the Real Dow for 1/66 and 10/82 are very different, = 46.4 and 15.1 (see plot), a more than 2/3 decrease over the 16.75 yr."

3 comments:

Anonymous said...

Would you do a review on this psychobabble film/book titled The Secret?

harmanjit said...

If you can give me the IMDB link to the film, I will look it up.

srid said...

It's a New-Agey film. :)
http://en.wikipedia.org/wiki/The_Secret