My interest was triggered by the Dale Wetzel radio program on Saturday morning of June 21, 2014. A discussion of the North Dakota defined benefits employee retirement plans reminded me that I hadn’t updated my Dow Jones Industrial Average (DJIA) graph for almost exactly four years.
The results are even more astounding than four years ago. As stated in previous articles, investment brokers are not necessarily the best source for the honest actual long term returns of the US equity markets. The linear trend line of this first graph is the only honest way to compute the rate of return on investment. The DJIA has earned an inflation adjusted return of 3.78% simple interest over the last 85 years and 7 months. The inflation adjusted annually compounded rate of return is about 1.7%.
These are not numbers a broker shares to lure potential investors… so selective periods of prosperity in the economy (called “bull markets” for those of you from Rio Linda) are chosen to suggest 8% to 12% and more in equity returns. If we were all excellent “market timers”, we would just get in low and sell high! Of course, we’re NOT.
Meanwhile, inflation, as measured by the CPI-U, is on the runway and gaining speed, not quite ready yet to lift off. Any discussion of inflation must necessarily reference the Federal Reserve’s target of 2% per year inflation. This ridiculous method of paying off the national debt by eventually destroying our national currency is, I believe, about to provide our nation the grim results our collective apathy may have earned. We wouldn’t deserve this inevitable fate if we hadn’t actually trusted the “socialists in charge” to act in our best interests. The second graph shown below reveals the magnitude of these two disturbing economic warning signs.
A 6th order polynomial trend line exhibited the highest correlation from which to project the future. The steep downward bend of the trend line is a huge wakeup call for something economically disastrous in our future, as has been predicted by Peter Schiff with little attention by the national media. As too many of our major trading partners comfort each other with currency agreements, the loss of our dollar as the world’s currency is a question of when, not if.
Currency devaluation, along with rampant inflation are the inevitable results of the Federal Reserve and its usual misguided efforts to mask our departure from free markets and capitalism to the almost universal poverty that accompany socialism. Ask a Russian citizen, “How’s it going?” the “shoulder shrugging” answer has been eighty years in the making, but many in Russia, and even here, still believe the “promise”…
So rather than cut or even eliminate the income and property taxes in North Dakota, we can all look forward to that eventual day when it all comes tumbling down and we are left with no choice but to bail out our public employee’s defined benefit plans with the revenues that should have been left in our pockets to truly diversify our North Dakota economy! My 401K is almost fully converted to low-risk corporate securities. As they say in the commercial, “What's is YOUR wallet?”