"Wall of Worry" poll results

It seems respondents are as much confused as I am, about which way to go. I quoted Benjamin Graham's advice for passive investors, which is to strike some balance between equities and high-quality bonds, anywhere from 25:75 to 75:25, with a default position of 50:50.

The results are almost exactly divided: 8 at the top end for equities, 8 at the bottom for bonds, 7 voting for a 50:50 split, and one for 65% equities/35% bonds.

Vote early, vote often

... as the Irish used to say. One more day to go on the Wall of Worry poll and the optimists are winning. Can this be so? If you have votes to cast, prepare to cast them now.

Which US Presidential candidate is the best hope for the American economy?

Looking at the current field for the 2008 US Presidential race (and trying to set aside other important issues), which candidate's economic ideas make the most sense for America? Unless the questions are asked, they won't come high on the agenda.

I have tried to use Blogger's new poll facility, which allows for more than one answer, but there's a glitch at the moment, so it's a one-shot question for now.

Your comments on the candidates, their ideas and the issues are welcomed.

Poll update

Early responders seem to prefer gold and silver to foreign currencies, as stores of value. As Shylock correctly pointed out, "thrift is blessing, if men steal it not", and the fear of inflation's theft appears to be greater than the promise of interest on foreign bank accounts. The "breed of barren metal" is winning at the moment.

Please vote in the polls opposite.

Could the Dow AND gold BOTH go up?

In unusual circumstances, normal behaviour changes, as Richard Bookstaber recently observed. If the dollar's decline continues, and gold maintains its "real" value, a 17% dollar devaluation would mean a corresponding 20.48% increase in the price of gold, carrying the yellow metal over the $800 threshold.

A weaker dollar makes imports more expensive - both finished goods and raw materials - but is a stimulus to some exports. Maybe, if it didn't all happen too suddenly and scare everyone off the market, the Dow would rise.

It would also mean paying back foreigners with cheaper money, a trick played on the world by Britain's Harold Wilson in the devaluation of 19 November 1967, when the pound's foreign exchange value was cut abruptly by 14%.

The US Treasury's figures for May 2007 show there's a total of $2.18 trillion in foreign-held securities. A Brit-style 14% devaluation would lose Uncle Sam's partners about $305 billion. John Bull's share of that loss would be some $23 billion, or around £11.5 billion.

Maybe that would finally get the British news media to notice the recent huge UK support for US government debt. I can hardly wait. Be still, my beating wallet.

There's a political price to pay, but US Presidents can't serve more than two terms anyway, not since they changed the Constitution to stop another Roosevelt reign.

Harold Wilson resigned in 1974, citing ill health, but I did once hear a rumour that the IMF, which bailed us out in 1975, had made Wilson's resignation a precondition of the loan. In these document-shredding and email-deleting times, a paranoid would say you know it's the truth when it's officially denied.

Meanwhile, please place your bets in the two polls opposite!

Poll: how would you hedge against a dollar fall?

...and for extra marks (especially if you're putting your money on it!), let's see what currency or precious metal looks like the best store of the value of your dollars.

Warren Buffett recently revealed he's hedged against the greenback, and gold and silver bugs are contesting the merits of their respective hoards. If your preference is for currency but you wonder about the backing, remember that Germany has the world's second-largest stock of gold, whereas Switzerland and the UK have been persuaded to get rid of about half their gold holdings since 2000.

Meanwhile, Japan and China are both struggling to hold their currencies down, to protect their export markets. Russia seems keen on claiming half the Polar region and is already able to use its energy supplies as an economic weapon. India is developing fast, and may turn out to be an interesting rival for China.

Here's our starting point today, using the figures from the Currency Converter widget on the sidebar. $1,000 will currently buy:

729.74 Euros
1,427.25 German Marks (there's a glitch in the currency converter, so I've done this in two stages)
119,080 Japanese Yen
7,581.23 Chinese Yuan or Renminbi
492.40 British Pounds
40,383 Indian Rupees
25,548.20 Russian Roubles
1,203.70 Swiss Francs

An ounce of gold costs $665.03
An ounce of silver costs $12.92

Where would you hold your savings until the New Year?

Dow survey update

One more day and we'll stop - thanks for your responses. We've seen a little bit of a rally in the last 36 hours and so far (12.35 New York time) the Dow is down 2.55% from its 25 July close. Pessimism is also down a bit - less than two-thirds expect the Dow to be below 13,000 at year end.

Any more votes?

Dow value afterthought

...and if we remember the heady close of December 1999, before tech stocks burst, the Dow was then at 11,497.12. We've had 7 years and 7 months elapse since, with an average growth of just under 2% compound per year. Adjusted for inflation (or available bank deposit interest rates), we've actually fallen behind; or, from a different point of view, we're not so wildly overvalued.

Actually, what I suspect has happened is that the balloon has a tear in it, and has been kept from falling to earth by massive amounts of extra monetary hot air; but "in real terms" we're still stuck somewhere in 1999. In short, we haven't yet faced up to the problems of our economy.

To use a different analogy, we're still drinking, in order to put off the hangover. But maybe there's lots more "booze" left (i.e. the Fed's printing press, aped by the Bank of England and others) and our "livers" (the real economy of production and jobs) will hold out a while longer.

It's not a strategy I'd recommend. I wonder what you think.

What should the Dow Jones be worth?

The Dow closed yesterday at 13,358.31; ten years before, it stood at 8,254.89. That's a compound annual growth rate of 4.93% (less, when you adjust for inflation).

Or if you take it from the big, big scare of Monday 19 October 1987 (close: 1,738.74, down 508 points from the previous Friday!), it's an average 10.88% compound per year. Does that seem too hot a pace? Unsustainable? But remember that we're starting that run from a real panic. If we took it from the happy close of the Friday before, the average becomes 9.53%.

Still too hot? If nearly 20 years isn't enough to establish a sensible long-term trend, let's look at an even longer period: 30 years from 30 July 1977. Then till now, the Dow's capital growth averages out at 9.45% compound per year. The market's folly can outlast your wisdom.

"Two views make a market", and that's it. Mr Market is making his wares available to you - will you buy at today's prices? (I wouldn't - but obviously others will, or the market would be lower.)

You can play with the figures yourself, on this fine page from Yahoo! Finance.

And please click on the poll opposite, to give your prediction for the year's end.