It's been difficult to pick up a paper during the

It's been difficult to pick up a paper during the past few weeks and not notice two major stories: The Dow Jones Industrial Average reached a record 12,000 while real estate values are falling.

A recent visitor from Mars could look at such headlines and instantly conclude that the best place to invest one's money would be the stock market. However, a savvy Earthling might want to look with a little more care.

The old DJIA record was established on January 14, 2000 when the Dow topped out at 11,722.98. At the close last Wednesday the Dow stood at a new high: 12,134.68. That's an increase of 411.7 or just 3.5 percent over almost seven years.

Investors during the same period would have done better with a passbook savings account at 1 percent per year.
The Dow today is not the same as the Dow in 2000 because the same bundle of stocks is not being measured. In April 2004 three firms on the Dow were replaced. American International Group, Pfizer, and Verizon Communications were added while AT&T, Eastman Kodak and International Paper were dropped. In other words, comparing the Dow in 2006 with the Dow in 2000 is not the same as comparing apples with apples, it's comparing apples with yogurt.
Corrected for inflation it would take $13,813 today to buy the same package of goods that $11,723 would have bought in 2000.
The Dow does not reflect the entire marketplace. As examples, the NASDAQ stood at 2,356.59 on Wednesday, down more than 50 percent from the 5,048.62 reached on March 10, 2000. As to the S&P 500, it closed on Wednesday at 1,382.22 -- significantly below the 1,527 level reached on March 24, 2000.

One of the reasons per share prices and dividends have been rising is very simple: Shares are being bought back by issuing companies, which means there are fewer shares available for purchase. At the same time, the number of dollars pouring into retirement accounts increases by hundreds of billions of dollars each year.

For example, companies in the S&P 500 bought back shares worth $116 billion in the second quarter of 2006, a record and 175 percent higher than the second quarter of 2004.

"The record $116 billion in buybacks is the result of over 40 percent of the S&P 500 companies reducing their share count during the second quarter," says Howard Silverblatt, Senior Index Analyst at Standard & Poor's. "The unprecedented expenditure on buybacks and the resulting share count reduction is having a material affect on both earnings-per-share and cash flow. Left unabated, this will eventually impact the supply of open market shares, and therefore the share price itself."

Okay, what about those falling real estate values?

According to the National Association of Realtors existing home prices stood at $220,000 in September, down 2.2 percent from the $225,000 recorded in September 2005.

Even with the new math you have to say that $220,000 is less than $225,000. But how many people buy and sell a house within a year? Isn't real estate a long term investment, something people own for years on end and often for decades?

Let's go back. It turns out that in 2000 -- when the Dow hit the then-record of 11,722.98 -- the typical existing home sold for $139,000. In other words, while stocks have been treading water since 2000, the typical home increased in value by $83,000.

What does it all mean?

First, despite recent news, real estate has done remarkably well in most places and for most people during the past few years when compared with the stock market.

Second, broad indexes -- whether up or down -- are fun to follow but may not be especially useful. No one buys all stock or all real estate, we purchase a particular stock or a given property. For instance, it's surely possible that contrary to the movement of broad indexes in the past few years some stocks rose terrifically while some homes saw significant value reductions.

Third, financial decisions should be made in the context of the particular investment being considered. National trends and broad indexes are nice, but really they're just financial background noise. Most importantly, neither national indexes nor prior experience tells us with certainty what will happen in the future. As stock brokers explain, past performance does not guarantee future results.

For more articles by Peter G. Miller, please press here.

Beyond obvious affordability concerns, forecasts of dramatically-increasing energy costs this winter threaten Canadian real estate owners and buyers on another level. Since these pronouncements appear to herald a short-term crisis, real estate buying, development and selling decisions may not take the long-term impact of rising energy costs into full account. Yes, this will be a tough winter, but even if crude oil prices dip at some point, the crisis will not be over. Energy cost can no longer be considered an incidental expense to buyers or an optional design consideration in development.

Managing real estate investments by responding to daily fluctuations in gas pump prices may short change you. Long-term strategies are essential to building property value and protecting it against economic fluctuations, including energy cost increases. The re-calibration has begun. Gas prices that were unthinkable a few years ago are now acceptable. Pump prices went up to C$1.40 a litre (that's about C$5.30 a US gallon) and caused panic. Now, that gas prices have slipped under a loonie a litre (a previously unimaginable price), there's widespread relief, but the problem has not gone away. "Approximately one third of the price of a litre of fuel in Canada is taxes," said John Williamson, Federal Director of the Canadian Taxpayers Federation (CTF), an advocacy organization that works to lower taxes, eliminate government waste and hold politicians accountable to taxpayers. "Taxpayers want action in the form of lower taxes on fuel, not more excuses from the government why gas taxes cannot be reduced.

"It is time Ottawa ended its gas gouging. This can be accomplished with three easy steps. Ottawa should end its GST tax-on-tax bite. This will lower the price, on average, by 1.5 cents a litre. It should scrap the 'deficit elimination' tax, which will save another penny and a half. Lastly, reduce the federal levy by 2 cents, bringing the total saving to motorists to 5 cents a litre. Theses modest measures will return $2-billion to taxpayers each year." CTF sets the cost paid by Canadian motorists through "the GST tax-on-tax bite (since 1991) and the 'deficit elimination' tax (since 1998)" at $9.5-billion. According to CTF, less than 5 per cent of the C$6-billion collected by the federal government each year in gasoline taxes is put back into our roadways.

One indicator of future rising energy costs is the government's revenue-protecting response to outcry over its gains on gas and energy taxes in this most recent crisis. The federal government does not give up its income -- your taxes -- without a fight. Remember the infamous 'tax bracket creep' caused when the income tax system was "de-indexed?" CFT reports that federal and provincial government coffers bulged with an additional C$90 billion before public pressure put an end to that revenue source 14 years later. While purporting to protect Canadian investments and lifestyles against rising crude prices without cutting taxes, the Government of Canada is: * Prepared to strengthen the Competition Act and the Competition Bureau by increasing criminal fines for conspiracy from C$10 million to C$25 million. This is considered sufficient deterrent to "unlawful cartel behaviour."

* Providing consumer information on crude oil, gasoline and furnace oil prices through the Office of Petroleum Price Information, funded at C$15 million for the next 5 years. * Offering a package of short-term and longer-term measures to help Canadians deal with high energy costs. It is "providing timely and direct financial assistance to low-income seniors and low-income families with children" by authorizing about 3.1 million payments totaling C$565 million under the proposed Energy Cost Benefit legislation * Creating "a number of measures to provide greater protection against future price volatility and achieve lasting environmental benefits by making homes and other buildings more energy-efficient" including

o C$500 million to provide direct financial assistance of between $3,500 and $5,000 to approximately 750,000 low-income households by 2010 that should defray the cost of items such as draft-proofing, heating system upgrades and window replacement under the new EnerGuide for Low-Income Households (EGLIH) program. For multiple-unit buildings and rooming houses, financial assistance will range between $1,000 and $1,500 per unit. Reportedly, cost savings will average about 30 per cent per household. * Freeing up C$400 million in previously allocated funds to allow municipalities to boost investments in urban transit over the next two years. But don't spend the extra money yet. Payments under the proposed Energy Cost Benefit and EGLIH program can be issued only after the legislation has received Royal Assent.