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10 Years After: The State of America

BOSTON (TheStreet) -- Economist Michael Pento says the U.S. is in much worse financial shape today than it was after Sept. 11, 2001.

But not for the same reasons -- for example, that the unemployment rate today is almost twice that of 10 years ago while consumer confidence has fallen by half.

Pento, president of Pento Portfolio Strategies in Parsippany, N.J., lays out what he says is a shocking statistic that has gone mostly unnoticed: The S&P 500 Index of the largest U.S. companies has risen 10% in the past decade but is down a whopping 85% if measured against gold. Investors, in other words, were burned by high valuations of stocks back in 2001, and since then have made up little ground while different asset classes such as gold and commodities have soared.

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That underperformance is what disturbs Pento, who was formerly the senior economist at investment manager Euro Pacific Capital in Westport, Conn., more than anything else he's seen. On Sept. 10, 2001, the S&P 500 closed at 1,092.54 and gold traded below $300 an ounce. A decade later, the S&P 500 is up to nearly 1,200 after fluctuating wildly between its highest point of 1,576.09 in October 2007 and a low of around 680 in March 2009. Gold, meanwhile, has been on an upward march to over $1,800 an ounce as investors seek safe havens for their money.

"That's a crash of epic proportions," Pento says. "Nothing good can ever come out of that one stat. That is one of the less promulgated facts because it's so daunting."

Pento also highlights the massive amount of debt on the balance sheets of both the federal government and individual households. In the fourth quarter of 2001, household debt was 73% of U.S. gross domestic product (GDP). Today, that figure is up to 89% of GDP. Federal debt, at about 55% of GDP 10 years ago, is now at nearly 100% of GDP.

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