If you are a beasts peddle plutocrat or a gold investor, or both, todaysPROFIT CONFIDENTIALis a must-read. Why? Because, by the case you are perfect declaiming this issue, you could thumping well be convin
Dow Jones Gold Ratio: Making Money from this All-Important Indicator
If you are a stock doorstep financier or a gold investor, or both, todaysPROFIT CONFIDENTIALis a must-read Why? Because, by the point you are finished rendering this issue, you could very well be convinced long-term that the beasts hawk is going down and gold is going up And you can make a stack of budgetary from these moves
Lets beginning with the celebrated numbers all investors should be aware of:
Stock chronicle first: The Dow Jones Industrial Average opened the year 2000 at 10,786. The corresponding register ended 2010 at 11,577.50 In a nutshell, if you were an investor in the Dow Jones Industrial Average, your money welfare appreciation over the ended 11 years would hold been a insignificant 7.3%. (No wonder we retain always preferred micro-cap stocks, penny stocks and small-cap stocks!)
Gold chronicle now: At the start of the year 2000, gold bullion was trading at $28000 per ounce Gold bullion closed out 2010 at $1,422 per ouncea welfare of 407% in 11 years
Now, lets pretend you jargon buy the stocks that comprise the Dow Jones Industrial Average in U.S dollars, but you can only buy them with gold bullion Taking the numbers above, in 2000, it would keep taken 38.5 ounces of gold to buy the Dow Jones Industrial Average. At the modern of 2010, it would keep taken only 8.2 ounces of gold to buy the Dow Jones Industrial Average. In other words, when measured in gold and not dollars, the value of the 30 lofty stocks that make up the Dow Jones Industrials has plummeted over the preceding decade
Now, when we look back at halfway a century of data in conformity to the relationship between gold bullion and the Dow Jones Industrials (often referred to as the Dow Jones Gold Ratio), it gets really interesting
In the term from 1930 to 1949, a 19-year span, the remuneration of the Dow Jones Industrial Average measured in gold bullion was under 5.0 (during that 19-year phrase it would own taken less than five ounces of gold to figuratively buy the Dow Jones Industrial Averages index)
In the period from 1974 to 1989, a 15-year span, the remuneration of the Dow Jones Industrial Average measured in gold bullion was unbefitting 5.0 again.
As I started writing years ago, with the screeching ramp in the fee of gold since the year 2000, I think we are entering another multi-year phrase where it entrust price less than five ounces of gold to buy the Dow Jones Industrial Average To see that happen, the remuneration of gold needs to ramp sharply, or the cows market has to come down, or both events dearth to occur
Now the scary part: over the last century there obtain been three times when only one ounce of gold could buy the Dow Jones Industrial Average If we are headed known to that superiority again (which I think we are), fortunes entrust be made over the next few years on the desire side of gold and economical team of stocks.
Michaels Personal Notes:
Words of wisdom from our noted specialized analyst, Anthony Jasansky, P Eng, on President Obama inadvertently putting the brakes on the livestock hawk rally:
Money talks and it has been utterance uncommonly tawdry after Uncle Ben started the monetary printing presses at the old Fed in delayed 2008. He was so impressed by the influence of the magical out-of-thin orchestration totality of $1.75 trilliondubbed ingeniously as quantitative easing (QE)that, in the nosedive of 2010, he cranked up the printing presses again, launching the $600-billion QE2.
Though these two immense cash injections posses been credited with reversing financial and economic calamity, they still fell crisp on some famous fronts Among the tycoon failings of QE are the anemic reclamation in GDP, lack of knot in employment, continued weakness in residential and commercial authentic estate, the battered US dollar, and unexpectedly higher yields of long-term treasuries and bonds.
When recently questioned on the effectiveness of QE, the Feds chairman has pointed to the strong cattle peddle as one important gain Without lost a beat, the U.S. President in his January 25 State of the Union speaking mentioned the recovery in the bovines vend as being the result of government actions to prohibit a melancholy Knowing how steadfast the peddle can be, Obamas bullish assertion may turn out be a timely clear for the stocks to bear a deep breather
Where the Market Stands; Where its Headed:
Could the bring hawk assemble in stocks be over? After all, the Dow Jones Industrials suddenly fell 166 points on Friday. Last Friday was a wake-up designate for investors and traders acceptance too cocky with this market Stocks do not go up in a lank queue week after week (as has been the instance for most of December 2010 and this January)
While I privation to see further action from the stock vend before I hurl in the towel on the manage market assemble that started in March of 2009, I query the assemble is over. This week opens with the Dow Jones Industrial Average up 2.1% for 2011.
What He Said:
Home sales down 8.4%, could be the bottom, interpret the headline in last FridaysUSA Today. What do they understand that I dont? They perceive what realtors and their associations alert them and thats about it Unfortunately, the real estate announcement is predominately written by reportersnot veritable estate investors with years of experience to share. The difficult message about the genuine estate sell in the US. are truly scary How can the US economy duck the laborious landing in U.S home prices? As well soon find out, it tidily cant! Michael Lombardi inPROFIT CONFIDENTIAL, January 31, 2007. While the appealing media was predicting a bottoming of the real estate sell in 2007, Michael was preparing his readers for the worst of times ahead