Since 1971 What Has Been A Better Return – Stocks Or Gold And Which Will Have A Better Future Return?

The math (according to

Dow 1/4/1971 – 830
Gold 1/4/1971 – $35

Dow today: $12,516
Gold today: $1,497

Dow percentage gain for that time-frame; approximately 1,500%
Gold percentage gain for that time-frame; approximately 3,500%

Gold outshines the Dow by a significant percentage to date, from the time that Nixon separated the relationship of gold and Federal Reserve Notes.

Of course those who are pro stocks will say that stocks pay dividends. Well, they used to pay decent dividends, so the 70’s and 80’s saw them paying 4.3% and 4.6%. In the 90’s and 2000’s, this yield fell to 2.7% and 1.8% respectively. But even with dividends, what was the total return of stocks after inflation?

1970s  -1.4%

1980s  11.6%

1990s  14.7%

2000s -3.4%

The 1980s to the 2000s were the glory years for the U.S. There was no competition to the U.S. dollar and stocks flourished. But what is the future of inflation, stocks and gold? Lets start with a look at the last 10 years.

The Last 10 Years Dow vs. Gold

Dow 5/18/2001 – 11,301
Gold 5/18/2001 – $273

Dow today: 12,516
Gold today: $1,497

Dow percentage gain for that time-frame; approximately 11%
Gold percentage gain for that time-frame; approximately 548%

You can go ahead and calculate the 1.8% dividend into the equation, but even at a 25% return, double the 11%, it is dwarfed by the overall gold return.

And your financial advisor more than likely did not have you invested in gold (or silver).

Where To From Here?

The question on everyone’s mind is, where will gold from here? Where will stocks go from here? While at the same time asking, which is a better place to put my hard earned money, stocks or gold?

In my book, “Buy Gold and Silver Safely,” I recommend that 20% of one’s portfolio be invested in physical gold. This leaves a full 80% for other advisors to manage. The question is, are these advisors biased against gold? If they tell you not to invest in gold, then they simply can’t do math and don’t know economic theory, let alone understand what in a portfolio counteracts the fall of the U.S. dollar.

Advisors will typically say “TIPS” Treasury Inflation Protected Securities will be a good place for you to invest for the coming inflation, but TIPS are a government answer to inflation, the CPI, not to real inflation. they may also claim that stocks have kept up with inflation over the years.

While stocks have done well in years past, mostly because they paid higher dividends, they haven’t performed as well the last 10 years or so. And with P/E ratios as high as they are today, they won’t return much for the next 10 years either, especially as we experience more unwinding of the credit expansionary years.

Ed Easterling, from Crestmont Research created the following chart showing the relationship of P/E ratios and dividend yield:

When you see lower P/E ratios again, and with it higher dividend payouts, then you will know stocks are of value. Right now, according to Robert Shiller’s historical analysis of the P/E ratio and interest rates as seen in the following chart, we’re approaching some historic highs:


Now, correlate the above data to the long term historic chart of the DOW and realize that in 2006-2007, the Fed started to raise interest rates. This killed the loan market and individuals who had adjustable rate mortgages (ARM’s), killed the housing market, killed the stock market, killed the derivatives markets, and finally killed the banks resulting in TARP.


Today, we can see from the chart, we have a higher market and lower rates than in 2008. The Fed is trying desperately to stimulate the economy. But the first round of QE was swallowed up by the banks and the credit contraction occurring. The second round of stimulus did push stock higher, but unemployment (the real numbers) hasn’t improved and banks still aren’t loaning. The only thing propping up GDP is the government ala what Japan has been doing for over 15 years.

When interest rates do revert higher, which they will at some point, it will kill the economy, the stock market, the housing market and the banks. But unlike 1980 when interest rates rose and people flooded to the dollar which paid good interest, as Volcker saved the world, the Fed can’t raise interest rates today as just noted above. So with P/E ratios at already lofty figures, as high as they were in March of 2008 right before the bottom fell out, do you think stocks have the propensity to move higher? If so, how and why? How much lower can the Fed push interest rates to stimulate?

I’m sorry this is not the 80s and 90s, and the Fed’s bag of tricks only has more Quantitative Easing in it. Game over.

The Future For Gold

The future for gold however is baked into the cake of higher returns. That’s because you can trust Congress and the economic advisors who got us into this mess to do what they do best…take care of the now at the expense of the future. You heard Treasury Secretary Snow before Congress voted for TARP in 2008, that it would be catastrophic if they didn’t do anything. Today you hear Secretary Geithner saying that the 2008 financial crisis would be “moderate” in comparison to what would occur today if they don’t raise the debt ceiling. It is worse than what the media lets on. I’m not a chicken little…I just put pieces of the puzzle together for all to see.

I keep adding to this list of issues we have moving forward:

  • Our Military Industrial Complex is unsustainable.
  • Medicare is unsustainable.
  • Social Security is unsustainable.
  • Our Manufacturing industry can’t compete with the low wages abroad and is unsustainable.
  • The FDIC is unsustainable as they are presently $8 billion in debt.
  • GM, Ford and Chrysler are building cars in other countries, but their overpriced cars selling here in America are unsustainable and so are their unions. The Fed still has 27% of GM shares to unload.
  • The Pension Guaranty Association can’t possibly keep up with the increasing number of defunct defined benefit plans and is unsustainable.
  • The sub-investment grade derivatives owned by the nations top 5 banks, now more than at the height of the financial crisis, is unsustainable (I will be writing an article soon expanding on my past articles on this – some very good info to look forward to in helping you understand whether you should be buying in gold and silver now).
  • Real Estate prices where prices had risen too fast and still have not returned to earth are unsustainable.
  • As the economy deteriorates, employment becomes unsustainable as more people will be laid off.
  • U.S. cities and states can not possibly maintain status quo without drastic cuts as their business/financial plans are unsustainable.
  • Commercial real estate delinquency rates are rising and future growth unsustainable (for those that own all those REIT’s financial advisors have been selling you the last decade). There is a reason advisors sell those REIT’s…they make 6% to 8% on each sale. But of course they believe in them. But do they really understand the commercial real estate market today?

There are more than the above. If you want to add to this list, email me at

Gold Is Insurance

Gold is the insurance that fits into a portfolio as the last piece of the puzzle that helps you counteract all of the above. Both silver and gold are the only assets that do this. But paper versions of gold and silver are not the same as owning the physical outright. They are illusions of wealth. At some point they have to be converted to real wealth.

What you need to know about gold is this. If you are on the dollar ship, aka the Titanic, running from one side to the other only works for so long. The dollar is priced in other currencies and at certain times the dollar is stronger than other currencies and other times weaker. Right now the dollar is gaining momentum against these other currencies which is causing a pullback, sans the recent bounce, in gold and silver. But listen…what most people miss is the fact the dollar (Titanic) is sinking. Running from bow to stern on a sinking ship doesn’t prevent the eventual demise of the runner. Only government cut backs, elimination of entire departments, Constitutional amendments that force Congress to live within their means with severe penalties if they don’t, will reduce the amount of debt (water) the ship is carrying so the ship can stay afloat. You see none of that occurring and that’s why you own silver and gold. And because you can do math.

So which is a better investment moving forward, stocks or gold? If I laid out enough reasoning in this article, then you should naturally be calling to buy gold and silver. But the thing is, most people are acting like the deer in the headlights. You need to be the deer that sees the debt storm fast approaching and get behind gold and silver to protect you from what’s to come. But as the old saying goes, you can lead a horse to water…but you can’t make them buy gold.

You can always buy at a higher price though. That’s what most people do. And I’m not ridiculing the reader of this by saying that. I’m just explaining human nature. It takes a certain awareness to be ahead of the crowd. I hope that this articles and others I have written have at least made you aware. Only you can take the next step. Call and ask questions. Dollar cost averaging in right now makes perfect sense. Those that do, end up happy…and have a little peace of mind.

If you haven’t yet invested in gold or silver, download this free report to see what’s really holding you back; 5 Reasons You Haven’t Bought Gold Or Silver

If you are shopping for gold and silver bullion and coins, pay only a 1% fee above dealer cost by calling Buy Gold And Silver Safely today at 888-604-6534.


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About Doug Eberhardt

Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534


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