Wednesday saw a bit of action in the stock market. The Dow Jones closed 1.78% (373 points) below Tuesday’s close. People following the stock market tend to focus on the points. Seeing the Dow Jones move down 373 points in a single session seems like a lot of points, and yes, it is. But the points (dollars) the Dow Jones is valued in today have been corrupted by the FOMC’s “monetary policy” of the past century
In 1982, had a day occurred where the Dow Jones moved 373 points, it would have resulted in an approximate 30% move in a single day, something that has yet to happen. To date, the record daily percentage decline occurred on 19 Oct 1987, where on a 508 point decline the Dow Jones dropped 22.16% from a previous day’s close. The largest daily decline during the Great Depression Crash occurred on 28 Oct 1929. Nine decades later, this day is still recalled as “Black Monday”; a 38.33 point decline resulted in a breathtaking 12.78% decline in the Dow Jones.
In 1929 that’s all it took; but in 1929 Ford was also selling automobiles for less than $500. As things are today, this week’s 373 point decline only resulted in a 1.78% decline in the Dow Jones.
The inflationary erosions in the US dollar, created by the “monetary policy” of the past century, is why I like to look at market history with my Bear’s Eye View (BEV) charts. In effect, a BEV chart compresses price data into a range of only 100%;
0.00% (BEV Zeros) = new all-time highs
-100% = a total wipe out in valuation
BEV charts ignore points. Rather they focus on percentage declines from all-time highs. So, a 40% decline from the late 19th century can be directly compared to a 40% decline in the 21st. Though the 40% decline in the Dow Jones from a time when steam engines and steel-railroad tracks were considered high tech may have taken only a 15 point move in the Dow Jones, its impact on an investor’s capital was the same as a 40% decline today.
As you can see below, the 373 point decline seen this week didn’t make much of an impact in the 132 year history of the Dow Jones.
I noticed something this week, and placed four boxes in the BEV chart below to illustrate it. Since early 2016 the Dow Jones has on four occasions attempted to break lower, and each decline fell short of its previous decline. That happened again this week too, as on Wednesday the Dow Jones declined -2.41% from its last all-time high, just short of its -2.50% line before it once again recovered at week’s end.
This pattern of the past year and a half just looks odd. As if someone is always watching to make sure the Dow Jones gets patched up every time it begins to deflate.
One of these days we’ll see the Dow Jones break below its -7.50% line in the BEV chart below. That would be a 1,584 point decline from its last all-time high of March 1st of this year. That will get everyone’s attention, but not as much as when it crosses its -15% line (a 3,167 point decline). A percentage decline the Dow Jones twice failed to do below in 2015 and early 2016.