"No warning can save people determined to grow suddently rich" - Lord Overstone

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Dow vs. Gold vs. Silver since 2008

We can read all sorts of opinions about what you should do with your money and we hear the scuttlebutt from every pundit out there (including myself!) but at the end of the day, it is about what has done well and what hasn't done well.

Even though I wrote the book Stock Investing for Dummies, I am not a blind cheerleader for stocks in general (although there are some good public companies and industries worth considering). Additionally, although I wrote the book Precious Metals Investing for Dummies, I haven't always thought of precious metals as the best place for your money either. I wasn't bullish on precious metals during the 1980s and 1990s but many of you know that I started being bullish on precious metals (and commodities in general) circa 2001.

In other words, I wasn't bullish on precious metals in recent years because I wrote a book on them....I wrote a book on precious metals BECAUSE I have been very bullish on gold, silver and other precious metals for nearly a decade.

In future articles I will certainly tell folks which segments of the stock market I favor. But let's get to the point of this particular piece... how did the Dow Jones Industrial Average (DJIA) do against Gold and Silver?

The period I will cover will be from January 2008 until the end of last week (March 16, 2012). How did the 3 of them perform during the most turbulent market conditions in recent decades?

Here is the tale of the tape:

On January 2, 2008 (using the closing price for the first market day):

  1. The Dow was at 13,043.96
  2. Gold was at $846.75
  3. Silver was at $14.93

How did they do? Here is where they were at as of closing on Friday, March 16, 2012 (along with the percentage gain or loss):

  1. Dow was at 13,232.62....up 1%.
  2. Gold was at $1,658....up 96%.
  3. Silver was at $32.27....up 116%.

Very Interesting! During a time period of over 4 years and 2+ months....the Dow actually ended up about 1 percent. Meanwhile, gold and silver roughly doubled during the same time frame.

What is even more interesting is that during that time, the federal government (and the "Fed") cranked out highly accommodative fiscal & monetary policies (bank bailouts etc.) to help (directly or indirectly) the stock market during 2008-2009.

In addition, please keep in mind that the components in the "Dow of January 2008" are not the same in the "Dow of March 2012". Some failing components were dropped (such as General Motors) from the January 2008 roster while more stable companies were added (such as Kraft Foods). How much worse off would the Dow have been if the exact same components were still in place?

Meanwhile, while gold and silver suffered from some antagonistic policies (such as excessive shorting in the futures market) and many financial commentators "talking them down", they performed very well. How much different would the picture had been if some forms of intervention did not take place?

What does the next few years look like for the Dow, Gold and Silver? Stay tuned... more on this in a coming commentary. Meanwhile do check out the latest video commentaries at my youtube channel (look up "paulmlad") for further investor points to ponder.

The bottom line is that investors learn from this not only the lessons of patience and discipline but also diversifying away from paper assets in the ongoing age of financial and economic crisis.


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