"Silent Crash": Why the Real Value of the Dow Jones Industrials Matters

Priced in real value, the Dow has collapsed 84% since 1999

By Elliott Wave International

Stock market investors who glance at their screens see the dollar value of the Dow Industrials.

Another way -- the way Elliott Wave International (EWI) prefers -- 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.

Clearly, one could ask: "Why is the Dow priced in real value important? I buy things with dollars."

Let's look briefly at the nominal (dollar valued) Dow vs. the real Dow. Then we can address why the Dow measured in real value matters.

On July 16, the nominal Dow reached an all-time closing high of 17,138.20.

"The value of the real Dow is not even close. Indeed, you may be in for a shock. The Dow priced in real money-gold-topped in 1999 and has collapsed 84% since then ... . Had the U.S. maintained honest money, the Dow would be priced at 266 today ... ."

The Elliott Wave Theorist, June 2014

Robert Prechter, founder and president of EWI, calls the collapse in the real value the "Silent Crash."

The December 2006 Elliott Wave Theorist explains why the value of the real Dow matters. Take a look at this chart [updated in July 2008] and read the commentary:

What happens when a market declines in real terms but not in dollar terms? We have one really good example of when it happened in the past, and [above] is a picture of what was going on back in the early '70s. If you recall, from the 1970 low to the peak in January of 1973, the Dow made a new all-time high. It went above the old high of 996 and got to 1051 on a closing basis. ... There was a lot of optimism, just as there is today.

But if you look at this blue line, you will see that the real value of stocks was falling during the end of that rally, and falling from a higher point way back in 1966-68. So you had declining values in real terms ... with rising values in nominal terms.

How did it resolve? It resolved with a collapse from January 1973 to December 1974, a 47 percent decline in the Dow, 49 percent on the S&P. In other words, the nominal prices played catch-up with the plunging prices in real terms.

The Elliott Wave Theorist, December 2006

The set-up today is much bigger.

Prepare now for what EWI sees ahead by reading a special report for investors just like you, titled, "The Nominal Dow: The Biggest Lie in Stock Market History." This must-read report is 100% free. See below for more details.

The Biggest Lie in Stock Market History - REVEALED!

There's a Silent Crash going on in the stock market right now that most investors don't know about -- but they soon will. Safeguard your portfolio now before it's too late.

As Robert Prechter says, "Bear markets always bring constricted time frames and breathtaking movements. You have to be ready for them."

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6 thoughts on “"Silent Crash": Why the Real Value of the Dow Jones Industrials Matters

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  2. This may be silly, but it does illustrate a point that many others have been making. Accumulation of fiat currencies at a time when its manipulators are increasing supply induces inflation (no matter how the statistics are screwed to show otherwise) does not result in a better standard of living. That being said, gold is too easily manipulated also to use as a baseline. It would be more realistic to use a basket of commodities like the commodity price index. Perhaps oil would even be better since the governments don't seem to be able to keep that contained.

  3. In many other terms too, this is fact, but not a million but trillion dollar question is, are people ready to accept this? or even try to understand this?

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