2 replies to this topic

[nicolasillo]

Here is a chart of the Real DJI. It goes up to June 2007. Next week when the cpi number comes out I ll be able to update it. Real DJI = Monthly Average DJI / CPI. As you can see from the Chart the DJI has not really made new highs yet (maybe with the July CPI and DJI average for that month we ll have a double top but we ll just have to wait and see).
Notice also that the real DJI broke the upper limit of the trandline connecting the tops of 1929 & 1966 in December 1996, when the then FED Chief Alan Greenspan gave the speech about "irrational Exuberance".
Let s see what happens next and if this bull market since 2002 was just a bounce (in real terms).

[traderpaul]

It is more meaningful if you plot this with the price of gasoline......Cup of coffee....Pack of gum etc

[89S10]

You might consider adding dividend income to the DJIA, if you have not. Value Line has a chart at

http://www.valueline...ueline_2006.pdf

This chart has the average annual dividend yield on the Dow going back to 1921. You could take the annual number, divide it by 12 and tack it on to the DJIA --- call it a DJIA total return index.

Also, if you don't mind using the S&P 500 and its precursors, Ibbotson has a more accurate total return series for that index.

Just a thought. I am not sure what it might show or not show. There is some theoretical or maybe it is empirical work suggesting that the dividend yield (very roughly) tracks inflation.