So as 2009 winds down, you assess the damage and say good riddance. Then you sneak a peek at your investment returns. Say, not bad. Maybe your 401(k) and other investments have grown by 20 percent to 30 percent. You start feeling optimistic, but then you come across an article in Monday’s Wall Street Journal that is as welcome as another layoff announcement.
What? They don’t adjust for inflation? They do it for just about everything else, so why not investments?
You really can’t believe it, but it’s true. The article has no answers for why this is the case, but it is loaded with facts that land like sucker punches.
The Dow Jones industrial average is hovering around 10,500, which is about where it was in 1999. But you had heard this was the lost decade for investment, and so the break-even news isn’t surprising … until you adjust for inflation. Do that, and today’s Dow is more like 8,200. That’s a 28 percent decline. To reach 1999 heights, it would have to hit 13,460.
OK, so that really burns, but you figure one day it will return to its high of 14,164 in 2007, which will do the trick. Problem is, that isn’t the record when adjusted for inflation. The all-time apex came in 2000. Plus, to reach the 2007 record now (when adjusted for inflation), the Dow would have to top 15,000.
The power of inflation is obvious. The purchasing power of your money is all that really matters. Ask anyone living off investment income or retirement accounts. So it’s puzzling that inflation isn’t factored in as a matter of course.
It’s like those breathless headlines about the latest big-budget movie breaking box-office records. Well, of course that’s going to happen when tickets are $9 and $10 a pop. But adjusted for inflation, “Gone With the Wind” still tops them all.
Frankly, my dears, business reporting ought to give a damn.
Looking ahead: Headlines I’d like to see in 2010 (provided such things still exist):
“Celebrities caught sleeping with spouses”
“Quiet please: Tiger breaks monastery’s course record”
“Gregoire to unions: You gotta be kidding”
“Study recommends no more studies”
“Economy rebounds as employment sparks more spending”
“Trader Joe’s buys YMCA site”
“Eyman named budget-cutting czar”
“Washington adopts income tax, cuts sales tax”
“Newspapers are in! Free content is out!”
“Spokane fills final pothole”
“Private pension bubble averted”
“Former Sgt. Thoma trades suit for conscience”
“Justice delayed: Zehm family wins compensation”
“Kirkpatrick turns down job offers”
“Technology scrubs phosphorus from river”
“Reversal of fortune: Average pay climbs”
“Free at last: Gay marriage legalized”
“Police stage pot bust presser; nobody attends”
“Make my day: NRA targets an actual problem”
“Palin quits Facebook; Levi buttons fly”
“Health care solutions imported”
“Cap-and-trade foes fail in bid to add anti-abortion amendment”
“Fossils: OPEC ministers decry energy alternatives”
“Heat wave cancels global cooling conference”
“Police ombudsman given investigatory powers”
“Nothing to hide: Panel volunteers to record executive sessions”
“Health care rollout: What was all that fuss about?”
“Iced tea: Insurgent party runs out of things to get mad about”
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