My favorite chart on Earth

What can we learn from looking at the history of the stock market, from 1913 to the present?

Stock Trader's Almanac / The Reformed Broker

This graph of the Dow Jones Industrial Average, from 1913 to the present, highlights the impact of wars on the market (a long-term flattening, with cyclical changes within) and interludes of peace, during which the Dow sprints upwards. The chart also shows the Consumer Price Index, during the same period of time.

By Joshua M. Brown Guest blogger

January 18, 2011

You know you're a stock market obsessive if you walk around all week with the hard copy Stock Trader's Almanac in your bag.

Notice where the apostrophe is in that title. Singular possessive - it's not a traders' almanac (as in for everybody), it's mine - yours if you have a copy. An indispensable book. Anyway, on page 36 is my favorite chart on earth. There are other charts like it but this one is mine, one chart to rule them all, etc. I was flipping through the book this morning on my train ride and came across it again, you have probably seen it before also.

This chart instantly puts my whole career and world in perspective whenever I see it...

As someone who began his career at the tail end of an 18 year bull cycle it keeps me hanging on.

As someone from a generation that has yet to see a true expansion of our own, it encourages me to keep building.

Click to Embiggen!

What we're doing now with monetary and fiscal policy is inflationary.

The world adding 75 million new mouths to feed is inflationary.

A billion people all attempting to become mobile phone-toting, SUV-driving middle classers is inflationary.

Fighting two wars (that are finally winding down) is inflationary.

But the aftermath of a wartime, big government-spending era is inflation, and inflation - when kept in check - leads to this. 500% return genuine bull markets.

I'm willing to wait and fight through to get to mine. Come tomorrow or a decade from now.

Get your own Stock Trader's Almanac at Amazon:

Stock Trader's Almanac 2011 (Almanac Investor Series)