Whatís the Footsie really worth?

Although the FTSE 100 now stands at 5041 which is a great improvement on last year, when one considers that a great deal of the money the government has printed has found its way into the stock market, a figure of 5,041 may not show the market's true worth.

Consequently, to find out what the market is really worth it might be an idea to use the gold comparator.

For example on January 3rd, 2006 the market stood at 5,618 while gold was £300 per ounce.

Now, if we take a point in the Footsie to equal a pound we can say that on January 3rd, 2006 the Footsie was worth 18.72 ounces of gold.

However, today the FTSE 100 was at 5,041 and gold stood at £657.91 and that means that today, the Footsie is worth only 7.66 ounces of gold and that is a tremendous collapse from the high in 2006. From 18.72 ounces of gold to 7.66 ounces of gold!!!!

If you use a silver comparator you will find much the same kind of thing.

According to the gold comparator, for the market to be worth today what it was worth on January 3rd, 2006, the Footsie would have to stand at around 12,316!!!!!

Itís amazing what spin doctors can do with a bit of quantitative easing.


Imagine things would be more interesting if jounalists started using a gold or silver comparator to keep us abreast of the state of the economy. It might even be fun if they used the Mars Bar comparator as that had quite an established record before they started changing the size of a Mars Bar.

---November 3, 2009---

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