"There are three kinds of lies: lies, damned lies and statistics."
Mark Twain made this quote popular in the bear market years of the early 1900s, before the Roaring Twenties, before the 1929 stock market crash that preceded the Great Depression.
We believe it is the perfect quote to frame a market crash on the horizon even bigger and more dangerous than 1929 (for those who are unprepared).
Robert Prechter calls it the Silent Crash.
Knowing about the Silent Crash will allow you to see, understand and protect yourself from the biggest lie in stock market history. If you are savvy, resilient and a bit lucky, knowing about the Silent Crash will also allow you to prosper as others suffer, which in turn will allow you to help others through the difficult times ahead.
What does Mark Twain have to do with anything? As market technicians, we put enormous value on timely financial and economic statistics, data. Part of that responsibility includes knowing how to use data properly.
For instance, are you aware of the numerous ways to measure the real value of your stock market shares? Many investors are not.
The most popular measure of share value -- the way the government and virtually everyone else prefers -- is nominal value, in terms of U.S. dollars. This measure of value is what you see on the financial news and on most market charts.
Another way -- the way we prefer -- is real value, in terms of the things you can actually buy with your Dow shares, such as real money (gold) or a basket of commodities. Yet another way to measure real value is in terms of the Producers Price Index, or PPI, which serves to adjust nominal values for inflation.
Do you know what the real value of today's Dow Jones Industrial Average looks like in terms of real money?
Would you believe us if we told you the real value of the Dow, measured in terms of real money (gold), is just 266? Believe it!
"The Dow priced in real money -- gold -- topped in 1999 and has collapsed 84% since then. ..." reveals Bob Prechter in his June issue of The Elliott Wave Theorist. "Had the U.S. maintained honest money, the Dow would be priced at 266 today."
So despite recent all-time nominal highs, the reality is that zero real progress was made during the past 14 years. In fact, the stock market actually lost ground -- and LOTS of it -- that is, if you care about how much stuff your Dow shares are actually worth.
In other words, even as nominal prices climbed to new highs in 2007, 2011 and 2014, real values remained in a bear market the entire time -- for nearly a decade and a half now.
