As the stock market soars to new highs, I find myself wondering if I’ve got it all backwards. It’s hard to stick to my convictions about an overpriced stock market and an overpriced housing market with the S&P 500 is up 15% since August.

But then when I look at some of the graphs in my computer archive, I remember how I came to these conclusions in the first place.

Exhibit 1: A History of Home Values

[source: NY Times, August 26, 2006]

Exhibit 2: A History of the Dow

[source: The Compelling Real DJIA, 1924-now]

Anyone who takes a look at data beyond the last 20 years has to recognize that the US economy is totally off the historical trend. You might argue that a new economic paradigm has been established in the last 10 years, but I don’t agree. I don’t think a crash is necessarily in order - my guess is probably a sustained inflation-adjusted price decline over a decade or so.

These charts left me racking my brain over the last 12 months as to where to put my investment money! The stock market is out. Most real estate is out. Cash is okay but at risk in an inflationary environment (still a possibility). So I chose to buy some gold, which has been on an up trend since 2001. I think it will continue for a few more years but it has remained pretty flat for 6 months now.

Still trying to figure out this macroeconomy thing…