It has been my observation that the majority of people make investment decisions based on many things but no weight is given to the most important factor, that being whether the investment is increasing purchasing power. (emphasis added)

In my humble view investment decisions must start with asset-class performance (stocks, bonds, commodities) against an accepted measure of value such as gold, broad market performance, and sector performance. The current mass thinking in the diversification and buy-and-hold theory has one keeping poor performing assets which makes no sense to me. This thinking doesn’t respect differences in time horizon.

If people were willing to shift an hour of their time daily to do proper research then they would find that their investment results would be much different.

With Gold the denominator, when the red line is rising the numerator, which in this case is XOM, is outperforming Gold. When the red line is declining XOM is underperforming gold. The only significance of the red line being above or below price is the relative value (how much can be purchase with XOM), which is not to be confused with performance.

The same goes for the blue line which measures the performance of XOM relative to the SP 500. When the blue line is rising XOM is outperforming the SP 500, when the blue line is declining XOM is underperforming the SP 500. Once again the amplitude only determine how much of the SP 500 XOM can purchase.

Note that the actual direction of price move is irrelevant. The SP 500 and XOM can both be in decline and the relative strength line will still rise if XOM is falling slower than the SP 500.

What is not shown is the RS line of gold to the SP 500 during this period. But during the bull market from 1982-2000 The SP500 outperformed gold. In other words the SP 500 was increasing in purchasing power (its ability to buy gold and commodities). XOM was outperforming gold too but at a much slower rate than the SP 500. During that period it was better (easier?) to own the index (or a stronger performing stock than XOM).

The measure of success of any investment is determined by the simple question, did purchasing power increase, decrease or remain unchanged?

During the 20-year Bull Market, Exxon purchasing power increased because it performed better than gold--but was it the best stock to own?

1988-2000 XOM grew better than gold (red) but underperformed the SP 500 (blue). Remember that the SP 500 outperformed gold during this period so while it didn't kill you to own XOM, implicitly you lost money for 12 years.

2000-2003 XOM underperformed gold and outperformed the SP 500 which was underperforming gold. XOM in this time frame would have been a bad investment.

2003-present is the only time that XOM outperformed both the SP500 and gold, makig it a sensible investment. But it must be noted that XOM cannot purchase as much gold as it did in 2005 even though it is showing a higher nominal price.