A look at the chart of the Dow Jones Industrial Average seems to indicate that the stock market has recovered from its lows in 2002 and is close to making a new historical high. One might believe that the bull market that began in 1982 has never even ended.

But there is a problem with this analysis. The value of the Dow is measured in US dollars which has been steadily losing value over the last few years. A more stable unit that we could use for measurement is gold which is money that cannot be inflated easily. So if we divide the dollar value of the Dow by the dollar value of an ounce of gold we determine the number of ounces of gold required to buy the Dow.

A look at this chart reveals that the Dow is off over 60% from it’s high in 1999 and back down to where it was in 1997. The Dow is still very much in a bear market!