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232 comments on DrumBeat: October 27, 2006

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Darwinian on October 27, 2006 - 11:30am Permalink | Subthread | Parent | Comments top
Since the # of USD has increased 50% since 2000, should not the Dow be up 50% since 2000?

NO, there is no logical reason why this should be so. The stock market, (usually measured by the S&P 500, not the Dow), is not directly connected to the money supply. Though of course there is an indirect connection. An increasing money supply usually means an increasing economy, causing the market to rise. But one does not necessarily track the other and there is no logical reason why they should.

However if inflation went up by 50% in a given time, then in order for the average shareholder to stay even, the S&P 500 would have to have increased by 50% also. Still there is also no logical reason why this should actually be the case. The market usually outpaces the inflation rate, but often they go in the opposite direction.

Ron Patterson

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elwoodelmore on October 27, 2006 - 5:39pm Permalink | Subthread | Parent | Comments top
excess dollars chasing overpriced equities     not a direct effect of excess money in the system ?  look at the p/e ratios man  
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Darwinian on October 27, 2006 - 6:37pm Permalink | Subthread | Parent | Comments top
Elwoodelmore, no one said one damn thing about excess dollars chasing overpriced equities. An increase in money supply does not necessarly mean excess dollars. The money supply increases because people borrow more money. Banks lending more money is what causes an increase in money supply. You can have an increase in money supply without any inflation whatsoever, and without any overpriced overpriced equities whatsoever.

None of this has anything to do with p/e ratioes.

Please pay closer attention to what the thread is actually talking about before commenting.

Ron Patterson

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elwoodelmore on October 27, 2006 - 8:08pm Permalink | Subthread | Parent | Comments top
then what is your explaination of excess p/e ratios ?
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Darwinian on October 27, 2006 - 9:08pm Permalink | Subthread | Parent | Comments top
Well I could give you a short lesson on why some stocks have very low p/e ratios and some have have high p/e ratios, and why they sometimes get very high. But since this original thread had absolutely nothing to do with p/e ratios, you were the only one to bring it up, I see no need to discuss p/e ratios any further.

But if you have any question or comments about peak oil or related subjects, then let us hear them.

Ron Patterson

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elwoodelmore on October 28, 2006 - 7:46am Permalink | Subthread | Parent | Comments top
ok agreed   just dont say anything stupid in the future  
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elwoodelmore on October 27, 2006 - 8:11pm Permalink | Subthread | Parent | Comments top
how long have you been a member of the bernanke fan club ?
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