The Real Dow Crash: The Dow Versus the AMEX Gold Bugs Index (HUI)

5 March 2008

I have written recently about the decade long crash of the Dow Jones Industrial Average in gold terms.

Recently, another chart came to my attention that is even more dramatic. Originally posted by Goldrunner on Gold-Eagle, this chart is worthy of further thought.

It turns out that from November 2000 through today's date, the venerable Dow has already lost 92% of its value against the Amex Gold Bugs Index (stock symbol HUI). Here you can see the Dow's November 2000 top in HUI terms.

For those of you who aren't invested in the precious metals markets, the message is somewhat clear. Most of the damage - in Dow terms - has already been done. That is, the Dow is unlikely to go to zero, so something considerably less than 8% remains to be shaved off the Dow in HUI terms.

However, there is another side to the story. If you reverse the chart, the HUI has outperformed the Dow since November 2000 by 1154%.

Thinking in these terms, it is very likely that gains of another few thousand percent may still be possible.

So perhaps it is not too late for Dow investors to alter their focus.

Here is the riddle of the sphinx for March 5, 2008.

Knowing what the past decade has taught us, why exactly would anyone invest in the Dow in the first place?