Broker Check

With the Dow setting new records, some perspective is in ord

| March 20, 2013

The Lead Comment

With the Dow making headlines and new records, it is important to keep things in perspective.  One view, the “Inflated View” below, shows that inflation has “eroded almost half the index’s overall gain since 1994.”

A more optimistic view – also important, is that the Dow has gained substantially, even with inflation, since 1994.

Inflation is the key issue.  If you are one of the fortunate few to have some type of COLA (Cost of Living Allowance) for all or a good chunk of your current or future retirement income, you are sitting pretty!

Conversely, if you are not among those fortunate few, it is important to have at least one – preferably more than one – inflation-fighting strategy.

This is not a recommendation to invest in the Dow, or in any specific investment.  But using the “Rule of 72” and a perhaps optimistically low 3% rate of inflation, the general price level will double in 24 years!  And, in the case of present and future retirees, they need to be particularly careful about their expenses in retirement that might rise much faster than that 3% number, especially for example, health care.

The How-To Articles

Money Lessons from ‘Downton Abbey’ . . . Wall St Journal

The Finance – Economic – Political Articles

Deficit Hawks ‘Generational Theft’ Argument Is a Sham . . . . LA

Why the Corporate Pension Gap Is Soaring . . . . Wall St Journal

Inflated View . . . . Wall St Journal

As the Confetti Settles, Strategists Wonder: Will Dow’s Rally Last . . . . Wall St Journal