Sic Semper Tyrannis

Just a quick comment, based on realizations I had while reading today's Barron's.

In nominal terms, the S&P 500 was up about 13.9% this year. Looks pretty spectacular, right? Those who were in stocks have certainly been patting themselves on the back, and those who weren't have been eating humble pie.

But this isn't quite the complete reality, so stop patting those backs and put down that pie. As some readers might recall, the dollar plummetting has been in the news a few times this year -- most recently, in late November.

I mention the dollar because, to really evaluate an investment's performance in today's globalized world, you must evaluate it in comparison to other similar investments available to you around the world.

Through that lens, the US equity market's performance doesn't look so great.

Based on the Federal Reserve's dollar index, in 2006, the dollar fell about 7.7% against a broad basket of currencies. Adjusting the S&P's valuation for this decline, we see that the index only increased in value about 5.14% for the year.

As Barron's reports, this puts the gain behind all major equity markets except Japan.

For perspective, without the rally that has been going on more or less continuously since mid-July, the S&P would be down 8.5% in international terms. That's some game of catch-up, and one which looks suspicious given the enormous liquidity that has been poured into the financial system over the same time span. A monetarist might point out that this is essentially inflation, for which a currency tends to be punished on the international exchange.

Anyway, I hope aD readers were internationally diversified (or holding some gold -- which was up about 20% this year nominally and 10% in real terms).