Re: OT: Makin' Money?

F. George McDuffee wrote:

If it was all a plot that would be the good news, because it
would mean somebody was in charge.

The bad news is it appears that the no-loads, d**k weeds,
f**kwits, and just plain crooks "screwed the pooch" and, like
cockroaches, spoiled far more than they ate or carried off.

The news media puts the best possible spin on things, but the
comparison of a 7,500 Dow in October 2008 to a 7,500 Dow in March
2003 is meaningless because the critical item is the actual value
of the stocks, i.e. what you can buy with their cash equivalent.

Thus these index values should be adjusted for inflation. The
most widely used and accepted inflation index is the CPI-U, and
you can look-up and download in text or xls format at
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
{Be reminded the CPI-U understates the actual inflation
rates/effects, so what follows is a best-case.}

NOTE 1


October 2008 CPI-U index 216.5 [actually 2.165]
March 2003 CPI-U index 184.2

a 7,500 Dow in Nov 2008 is
7,500 / 216.5 = 3,464 in 1982-84=100 dollars
and 3,464 X 184.2 = 6,381 in March 2003 dollars of equivalent
purchasing power.

While a 7,500 Dow in March 2003 would be 7,500 * 215.5/184.2
or 8,815 in Nov 2008 dollars of equivalent purchasing power.

==>The further back in time that you go for the comparison, the
worse it gets, thus the inflation-adjusted "value" of GM and
Ford stock is *BELOW* what it was in the depression.<== Given
the wage levels then prevailing, an individual would need to work
several hours on a GM or Ford assembly line to buy a single
share, while currently even a hours work at minimum wage will buy
several shares.

When this is pointed out to the "stock floggers" their usual
reply is "you didn't include the dividends" to which I reply "so
what?" [I didn't include capital gains tax effect either.]

What we are comparing is the value of a bundle of stocks today
with an equivalent bundle in the past, in an attempt to gage the
amount of capital created or destroyed.


NOTE 2

One of the high points of the automotive "rescue" hearings was
when Pelosi told the Detroit CEOs "you show us your business
plans, and we'll show you the money." The hearings have been
recessed until December, but the lack of immediate availability
of a finished restructuring/reorganizations plan [like out of
their pocket or briefcase, possibly on a CD, with a copy for each
Congress person] by any of the three executives tells me all I
need to know.

Note 1: True. I mentioned before there was one way to avoid the 7500 bottom and we would not like it. Just go into hyper-inflation where you get a wheelbarrow full of money on Friday to get a bag of groceries at the store.

Note 2: Also true on the high point. Talk radio has made a big deal, and rightfully so, about the "big three" going to the meetings in their private jets and $5000 suits with cup in hand to beg poor, almost already strangled taxpayers for a handout then getting back into their private jets to attend their daughter's recital that night hundreds of miles away....

If it weren't so serious I'd say it was really funny the way these big wheels have tried to manipulate the system. I realize they were often hamstrung by greedy union bosses who basically said, "You give us what we want or we'll walk off the job and cost you millions of dollars for every day you wait to make up your mind to see things our way!" The unions are probably as guilty as the board of directors who voted multi-million dollar bonuses to their bosses each year - and should share in the debacle.
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