Tag: Dow gold ratio

DOW RECORD HIGH – NOT EVEN CLOSE

You won’t get this prospective from the shills and shysters on CNBC. The record high in the Dow, touted by the talking heads, is in fiat dollar terms. In terms of real money – gold – the Dow is still 65% below it’s 1999 high. And that is after a huge rally from the 2009 lows. With stock valuations at record highs and gold having fallen 37% from its 2011 high, do you really think the Dow has a snowball’s chance in hell of even coming close to its all-time high. Not bloody likely.

For some perspective on the long-term performance of the stock market, today’s chart presents the Dow priced in another global currency — gold. Today’s chart illustrates how it currently takes a touch more than 15 ounces of gold to ‘buy the Dow’ (i.e. the Dow / gold ratio) — well off the 44.8 ounces it took back at its peak in 1999. From the 1999 peak until 2011, the Dow (priced in gold) endured a massive bear market. Since 2011, gold has struggled while the Dow has continued to rally. All of this has resulted in the Dow (priced in gold) rallying in a well-defined, upward sloping trend channel. Despite this strong rally, however, the Dow (priced in gold) remains well below its 1999 peak.

Chart of the Day

DOW STILL 66% BELOW ITS 1999 PEAK

You won’t hear the bimbos, boobs, and shysters on CNBC talking about this chart. It seems even after a couple of rough years for the barbaric relic, its 12 year bull market has helped it retain its supremacy over the stock market. Now the real question. Over the next ten years, will the Dow/Gold ratio go back to 44 or to 5 or lower? The Dow is at an all-time high and valuations are at levels of 1929, 2000, and 2007. Gold is down 37% from its 2011 highs.

For the ratio to go back to 44 would require gold to drop to $600 and the Dow to soar past 26,000, or some combination thereof. Does that sound likely?

For the ratio to go back to 5 would require gold to hit $2,000 and the Dow to drop to 10,000, or some combination thereof. That would be a 67% increase in gold and a 45% drop in the Dow. Does that sound reasonable?

 

For some perspective on the long-term performance of the stock market, today’s chart presents the Dow priced in another global currency — gold. Today’s chart illustrates how it currently takes approximately 15.3 ounces of gold to ‘buy the Dow’ (i.e. the Dow / gold ratio) — well off the 44.8 ounces it took back at its peak in 1999. From the 1990 peak until 2011, the Dow (priced in gold) endured a massive bear market. Since 2011, gold has struggled while the Dow has continued to rally. All of this has resulted in the Dow (priced in gold) rallying in a well-defined, upward sloping trend channel. Despite this strong rally, however, the Dow (priced in gold) remains well below its 1999 peak.

Chart of the Day

“Regardless of the dollar price involved, one ounce of gold would purchase a good-quality man’s suit at the conclusion of the Revolutionary War, the Civil War, the presidency of Franklin Roosevelt, and today.” – Peter A. Burshre