When Pigs Can Fly, the Devil Shivers in Hell, and 30% Gains in Western Stock Markets Will Mean Practically Nothing

Posted by: smartknowledgeu Post date: 10/14/2010 – 05:04 Since March 6, 2009, the S&P 500 has seemingly been on a remarkable run, gaining 76.68% when priced in our favorite of monopoly currencies, the US dollar. However, when priced in gold, despite the daily rigging games of the government/banker cartel for the past two years, it has only managed to rise 21.64% over the same time span. When priced in silver, the S&P 500 has astonishingly lost 1.8% during the same investment period. To these enormous anomalies, we ask the question,”Will the real currency please stand up?” Navigation PollsDonate To Zero HedgeRecent posts Shopping cart View your shopping cart. User login Username: * Password: * Create new accountRequest new password Zero Hedge Reads Angry BearBearish NewsBoom Bust BlogChina Financial MarketsChris Martenson’s BlogContrary InvestorCoyote BlogCredit WritedownsDaily CapitalistDaneric’s Elliott WavesDealBookDealbreakerDr. Housing BubbleFalkenblogFibozachiFund My Mutal FundGains Pains & CapitalGlobal Economic AnalysisGonzalo LiraImplode-ExplodeInfectious GreedInvesting ContrarianJesse’s Café Américain Market FollyMax KeiserMinyanvilleMises InstituteNaked CapitalismOf Two MindsPension PulseShanky’s TechBlogThe Daily CruxThe Mad Hedge Fund TraderThe Market TickerThe Technical TakeThe Underground InvestorWall St. Cheat SheetWashington’s BlogWealth.netWhen Genius Prevailed Home smartknowledgeu's picture Submitted by smartknowledgeu on 10/14/2010 05:04 -0500

KIMPurchasing PowerSmartKnowledgeUUnemploymentYenYuan

With deception in the mainstream financial media reachingnew heights regarding the recent rallies in Western stock markets, it’s time toshed some light on this matter. The first rule of building wealth is that yourgains have to outpace the rate at which Central Bankers depreciate the currencyin which your asset is denominated. Otherwise you end up with more money in youaccount but no better standard of living. For example, if your investmentadviser tells you that his or her goal for you this year is 8% returns, ifCentral Bankers have depreciated your currency by 15% this year, thenfulfilling his/her goal actually results in a 8.2% destruction of your wealth,exclusive of tax consequences.


Even though every investment veteran, sans the most naïve ofthe naïve, understands that the US stock market has been rigged higher for thepast two years solely through free market interference by politicians and WallStreet elements, what if these rigging games continue and the CentralBanking/government cartel successfully rigs the DJIA and the S&P 500 higherby another 30%? Those still naively invested in the broad US stock marketsshould be ecstatic because of the fact that their accounts now hold 30% morepaper money, right? Wrong. In 2007, the Zimbabwe Industrial Index soared 545%and at one point, on a 12-month rolling period, was up more than 12,000%!However, Central Bankers in Zimbabwe would probably not care to reveal that theunemployment rate during this stock market “boom” was also an astounding 80%.


But this is the trick that Central Bankers use to fool thosethat don’t understand how the monetary system works. Central Bankers canactually rig the stock markets to return a greater absolute amount of dollars(or Euros, or Yen, or Pound Sterling or Yuan) and a significant positive returnin nominal terms, that in actuality, may contribute nothing to or may evendecrease your REAL net worth.


So let’s put this into pictures. Below I’ve reproduced threecharts for you. The returns of the S&P 500 priced in the fake monopolymoney of US dollars since its bottom on March 6, 2009 and the returns of theS&P 500 priced in what I consider to be the only two REAL forms of moneytoday, gold and silver. When priced in US dollars, the gains of the S&P 500are an enormous 76.68% since March 6, 2009. Not so fast though. Price the gainsof the S&P 500 in gold and more than 55% of those gains disappear. Againstgold, the S&P500, despite the daily rigging games of the government/bankercartel, has only managed to rise 21.64% since March 6, 2009. Price the gains ofthe S&P 500 against silver since March 6th, and not only does every singlepercent of the 76.68% gains disappears, but it actually astonishingly loses1.84%.


S&P500 gains priced in gold and silver

The moral of the story? Beware of Central Bankers bearingbig bags of paper money as gifts. It’s not the amount of money you own thatcounts or your nominal returns that matter. All investors should be fixatedupon only REAL returns (adjusted for REAL inflation, not official governmentinflation rates which are never correct) and the purchasing power of theirmoney, not how much of it they have.



About the author: JS Kim is the Managing Director of SmartKnowledgeU, a fiercely independent investment research & consulting firm dedicated to exposing the fraud of the mainstream investment industry, helping the everyday retail investor earn real gains, and uncovering the best ways to invest in gold and silver.







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by Chartist
on Thu, 10/14/2010 – 05:46

yes, but the money still spends.

Login or register to post comments by Robslob
on Thu, 10/14/2010 – 06:46

But buys nothing…

Login or register to post comments by aerojet
on Thu, 10/14/2010 – 08:04

Last time I looked, I can pay for my house in dollars.  If I  throw money in stocks while the dollar shits and then cash out, can’t I pay off the house?

Login or register to post comments by Goldenballs
on Thu, 10/14/2010 – 06:47

At least with Monopoly money you collect £200 when you pass Go.Money still spends but will purchases less and less.If you like your assets to be manipulated just stash cash and watch it plummet.

Login or register to post comments by fallst
on Thu, 10/14/2010 – 06:53

So, the “Gold Bug” meme, has now disappeared from American Conciousness?

This was the Big Joke on CNBC.

Oh, the Gold Bug Kooks. Ha.

Login or register to post comments by aerojet
on Thu, 10/14/2010 – 08:02

We need a version of Monopoly where each time you round the board, the currency is worth less.  Hyperinflation Monopoly.

Login or register to post comments by Big Corked Boots
on Thu, 10/14/2010 – 08:41

The street names would be taken from Washington and not Atlantic City?

Login or register to post comments by Walt Whitman
on Thu, 10/14/2010 – 09:12

I think you guys are on to something…

Too bad it will have to be bought with worthless paper cash.

Should be called Debauchery Monopoly: The Ironic Edition

Login or register to post comments by hbjork1
on Thu, 10/14/2010 – 09:42


That is a great idea!  Microprocessor chips are cheap these days.  Should be possible to make an upscale game that would teach kids about the effects of inflation. Decent computerized Chess boards were introduced three decades ago.

Sounds like a joke but in the games business truth is stranger than fiction.  1) Fresh out of school (U) in the 50’s, I played with electrically resistance (110V) cooked hot dogs.  (Hamburgers worked but required more complicated hardware.)  Commercialize – no.  Imagine the lawsuits filed by wackos who somehow defeated the safety bypass and shocked themselves.  Then what to my wondering eyes should appear a little over a decade later than a simple plug-in Westinghouse electrical hot dog cooker. 

Another time, when doing government contract work irriadiating things with Cesium 137 gamma, there was a firm in California tha advertised the cryogenic freezing of the departed so that the body was well preserved. (For potential future recovery?)  I suggested (ha ha) that it would more practical to make the casket out of lead an put a little cesium source (long half life) in the casket with the departed.  The gamma would kill everything that might degrade the body(except, of course, for the gamma which would break lots of bonds).  Guess what?  About a year later we saw a patent filing by somebody from Brookhaven on the process and purpose.

Crazy world out there.  You’ve got a decent idea.  You can get info on the letter filing on the internet.   


Login or register to post comments by Species8472
on Thu, 10/14/2010 – 06:52

You do not add or subtract percentages if they are not part of the same 100% pie! therefore you need to multiply:

an 8% gain (1.08) and a 15% depreciation (.85) is

1.08 X .85 = .918 which is a loss of 8.2% not 7%. With small numbers it doesn’t matter that much, but 15% is not small.


Login or register to post comments by smartknowledgeu
on Thu, 10/14/2010 – 06:56

we stand corrected and will amend the article to reflect your pointed out correction. thx.

Login or register to post comments by Charley
on Thu, 10/14/2010 – 07:14

Now perform the same calculation for the average hourly wage since 1970. Priced in gold it is currently below ten percent of the 1970 level. If you want to talk about folks who have gotten f***d by this game, that is the place to start.

Login or register to post comments by aerojet
on Thu, 10/14/2010 – 07:54

My dad always said he lived better on $3K/yr. in the 1960s than he did in the 1980s making over $50K/yr. 

Login or register to post comments by hbjork1
on Thu, 10/14/2010 – 09:51


Yes.  Some of it might have been change in expectations but it is at least a factor of a little over 10. 

Login or register to post comments by doolittlegeorge
on Thu, 10/14/2010 – 07:40

you mean “will the real compounders stand up.”  Gold is a nothing burger compared with agriculture.  Now either jump off the tracks or get run over ’cause that’s a FREIGHT TRAIN you moron.

Login or register to post comments by aerojet
on Thu, 10/14/2010 – 07:53

Stock market priced in gold, blah, blah, blah.  If you bought futures contracts this past  couple of weeks, you are sitting on some very solid gains.  I realize the dollar taking a shit is behind all of it, but the ramp job worked.

Login or register to post comments by Goldenballs
on Thu, 10/14/2010 – 07:59

Sticking plasters are temporary and should not be viewed as permanent.

Login or register to post comments by aerojet
on Thu, 10/14/2010 – 08:10

Of course not! 

Eat, drink, and be merry, for tomorrow we die

Login or register to post comments by dragonspirit
on Thu, 10/14/2010 – 08:59

Crap. Who cares about S&P priced in gold? As far as I am concerned, hard assets are getting cheaper, discounts are getting deeper, sales are on… ole bucky buys me more than ever.


And besides, you guys over yonder in the good ole US of A keep forgetting all the time that worldwide debt is priced in USD, and there is a helluva lot more USD debt that USD cash. Ccommodities are priced in USD (for the most part, at least) and the green bits of paper are happily accepted at black market rates in just about every underdeveloped economy… which has a combined population and demand exceeding that of the US. Yes, for the bucky. The euro won’t be feeling too good very soon, the EC will most likely disintegrate into a mass of squabbling neighbors that the europeans always have been historically, and asia..  asia produces crap the west consumes, and it doesnt have enough domestic wealth to replace that consumption. So I say, fuggit, the buck will be the strongest currency there is, at least for a couple of years. The US is the biggest economy out there (and yes, I know the lazy ass gringos produce mostly services and outsource production of products), its still the most liquid and the most appealing in terms of credit risk. The the coming worldwide debt implosion the world will be selling everything (including gold) to cover their USD debts… sending the buck higher. Whoever is left standing without debt will prefer to park their wealth in US treasuries, which they have to buy with USD and not euros, dinars, pounds or whatever. Gold? Hah. Can’t eat the danm thing. I bet most people who have been holding gold for longer than the last 3 years and quitely taking profits… and with Mr. T touting gold on Bloomberg I bet gold has cilmbed about as high as it will, at least for the time being. Once it starts to roll back, everyone that climbed aboard recently will be bleeding badly.


Thats my view in a nutshell. For disclosure: I’m short everything (gee, that wasn’t too hard to guess, was it?) and long the bucky. Yes, at the moment its a bit painful, but I can bear a little pain now in view of good gains later.

Login or register to post comments by I need more cowbell
on Thu, 10/14/2010 – 09:30

I salute you, sir. Anyone who is obviously too stupid to breathe, to have the energy to construct such a long-winded piece of idiocy- hats off to you!

I myself have no such energy, so just one mild retort. Taking profits in gold over last three years? And putting said profits in dollars? Please just look at both graphs over last three years and explain how losing money selling gold to buy dollars was profitable?

Login or register to post comments by yipcarl
on Thu, 10/14/2010 – 09:43

ah..someone with a brain. nice.


Look at the monkey who disagrees with you, his screen name and picture.  Probably hacked his house to buy gold and is married to it like alot of the peopel here.  Gold is fine but it’s not the end all be all.

Login or register to post comments by I need more cowbell
on Thu, 10/14/2010 – 10:07

I feel so intellectually crushed. Yes, my nom de plume and icon are so inferior to “yipcarl” and a bag over your head.

I have no certainty what gold, any fiat currency, any asset class, will do in the future. I have assessed proabilities, and made choices therein. The dollar at some point will of reverse course, and gold will ( most likely) not be moonshooting daily.

But I and others have been minting money for many years holding gold, so don’t give me your bullshit assumptions about me- you know nothing.

Login or register to post comments by yipcarl
on Thu, 10/14/2010 – 09:27

Our money buys nothing?  What are you people talking about?  Prices in my area of the country are not going up on the whole and there is VERY little inflation.  Houses, rents, cars, food, electronics, etc are going down.  Commodities are going up for now that’s about it.  Let me get soemthing straight. Let’s say there is 100 Trillion in debt and 10 trillion is bad debt, debt that has been defaulted on and will never be paid back.  So now the central bank adds 10 trillion in the system to replace the 10 trillion that is dead.  HOW IS THIS INFLATIONARY?  if all your doing is adding back to the market the amount that was defaulted on…how is this inflationary?

This article is stupid in that this action doesn’t not gaurantee inflation even though the pundints tell you so and gold rallies, of course it does.  You can’t measure inflation effectively over a 6 month period either.

Login or register to post comments by yipcarl
on Thu, 10/14/2010 – 09:35

It seems also to me that this board is overrun with intellectuals compared to others HOWEVER the mantra of ‘monopoloy’ has gone too far.  The only thing that’s happening is our government is handing money to rich people, that doesn’t cause inflation.  No one is lending, no one is spending, that ‘printed’ money is causing absolutely no inflation because it’s going into the hands of the banksters not getting into circulation.  Furthermore the mantra also seems to be the perception that there are so many great places to put money.  The US may look horrible but you tell me what currency, spendable, don’t tell me gold, that you want to put your money in?   Euro?  Canadian dollar?  Brazil?  China, the socialist republic ponzi scheme?  Give me a break the US dollar will tryumph.  The US still controls the land, air, and sea and maybe many of you forgot he who has the money(even if it’s a lot less)and guns makes the rules.  This gold gold gold inflation inflation inflation mantra is getting a little much, it’s a bit like the rah rah rah, market, go, go, go of CNBC.

Login or register to post comments by Jean Valjean
on Thu, 10/14/2010 – 09:56

It’s not causing inflation NOW.  But as confidence wanes, it will.  What people promoting gold and silver are doing is WARNING you.  What you and dragon don’t seem to understand is that the dollar = a note = US debt.  As debt deflates, or becomes worth-less, everything else will inflate relative to it.  Historically it has happened many times.  Many of us think it is happening now.  It starts slowly and grows into an avalanche.

I agree that gold and silver are not currently ‘spendable’.  That is why I look at them as insurance.  But you should try to imagine a world where they are ‘spendable’ and the FRN is not.  If that happens, you will wish you had some.  So will Mako.

Login or register to post comments by hbjork1
on Thu, 10/14/2010 – 10:43



Login or register to post comments by hbjork1
on Thu, 10/14/2010 – 10:44



Login or register to post comments by I need more cowbell
on Thu, 10/14/2010 – 11:41

Of course they are spendable, i can within 10 minutes go down and exchange one of my gold coins for fiat. And if I don’t like dollars at the moment go to the bank and exchage for yen, euros, whatever. I of course pay for each transaction, but it’s all spendable. 

My stocks are spendable- I pay my $7 to Scottrade and voila 10 shares of Bullshit Inc. becomes $100 of bullshit fiat.

Login or register to post comments by yipcarl
on Thu, 10/14/2010 – 10:05

I have gold I didn’t say I didn’t.  I do understand this, there is no reason to demean me because I disagree.  I studied economic history in school I’m well aware.  I’m telling you of the largest developed nations we are going to be fine for quite some time and DEFLATION will ensue FIRST, then after this period of deflation we may have RUNAWAY inflation HOWEVER not before we have ALOT MORE DEFLATION and therefore all you inflation bugs will be wrong, then later, right.  Just because we disagree with you doesn’t mean we don’t get it??

Login or register to post comments by RacerX
on Thu, 10/14/2010 – 11:00

Right. It all comes down to following the price action. You can either fight it or go with it.

Login or register to post comments by Doctor sahab
on Thu, 10/14/2010 – 10:43

In parts of Malaysia, Indonesia and Indian subcontinent you can use gold and silver to buy goods and services. Maybe not formally everywhere but definitely informally.

Login or register to post comments by obewon
on Thu, 10/14/2010 – 11:31

Thanks, JS, for another great “common sense” commentary.

Unfortunately, there’s always the naïve and the extremely naïve who can’t seem to understand common sense. A quick perusal of the responses here proves that point.

Login or register to post comments by dougiefreshhh
on Thu, 10/14/2010 – 11:39


Mr. T ( a gold icon) on public tv.

Gold ATM’s coming to America.

“Weaking dollar” news on Yahoo front page…

“We buy gold!” shops in strip-malls.

Gold must be going up becuase of inflation worries..

Sorry gents…the big dogs have been picking up gold over the years.  It is now time to blow this thing sky high. 


Login or register to post comments by kevinearick
on Thu, 10/14/2010 – 12:13

always back to the exit strategy.

love that headline that oil is the least volatile on the other thread; what, are they measuring averages: anyone trading intra vs inter day has been making a bundle.

Who cares if it’s going up or down; a 3% change is a 3% change, negative or positive, and it happens like clockwork.

What choice does the Fed have? none.



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