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If S&P is 500 to 600 by year end and gold stays around $1000, that puts Dow/Gold at about 5, right at the lower limit band. Are we still looking for overshoot to Dow/Gold=2 or will Dow/Gold=5 be the time to reallocate back into stocks? Thanks.
Jimmy
Ha, that's funny. The ratio is going to .000000000000001, so ya, I'd call that an over-shoot.
If S&P is 500 to 600 by year end and gold stays around $1000, that puts Dow/Gold at about 5, right at the lower limit band. Are we still looking for overshoot to Dow/Gold=2 or will Dow/Gold=5 be the time to reallocate back into stocks? Thanks.
Jimmy
If it bottomed at 2 in the 30s and 1 in the 60s, it may well bottom at 0.5 this time. Who knows ahead of time. Maybe we'll see Dow 5000 and gold $10000 or Dow 2500 / gold $5000 at some point in the next 3-7 years. Gold has hit an inflation adjusted peak of about $10000 before - I believe as recently as the year 1869...
If S&P is 500 to 600 by year end and gold stays around $1000, that puts Dow/Gold at about 5, right at the lower limit band. Are we still looking for overshoot to Dow/Gold=2 or will Dow/Gold=5 be the time to reallocate back into stocks? Thanks.
Jimmy
If it bottomed at 2 in the 30s and 1 in the 60s, it may well bottom at 0.5 this time. Who knows ahead of time. Maybe we'll see Dow 5000 and gold $10000 or Dow 2500 / gold $5000 at some point in the next 3-7 years. Gold has hit an inflation adjusted peak of about $10000 before - I believe as recently as the year 1869....
Ha, that's funny. The ratio is going to .000000000000001, so ya, I'd call that an over-shoot.
jtabeb,
Is it me, or are you even doom-ier than usual lately? Your comment implies the total demise of the US stock market, the US Dollar, and the USA. Am I reading you correctly?
Another recent post of yours talked about going postal. Maybe you could lighten up just a bit?
If it bottomed at 2 in the 30s and 1 in the 60s, it may well bottom at 0.5 this time. Who knows ahead of time. Maybe we'll see Dow 5000 and gold $10000 or Dow 2500 / gold $5000 at some point in the next 3-7 years. Gold has hit an inflation adjusted peak of about $10000 before - I believe as recently as the year 1869....
- Would not be shocked to see a decline in gold to the $750-680 range before a successful break above $1034. Not saying gold will not proceed to break out now, but it may not do so without more pain for gold bugs first.
Sentiment is a bit more positive toward gold than one would like to see at this point. A second sharp drop down to around $700 +/- might do wonders in correcting that situation. Additionally, a solid rally in the U.S. dollar and U.S. T-bongs would alleviate the overwhelmingly negative sentiment found there.
what does it mean when those cash-for-gold stores are popping up all over?
On my drive to work (13 miles) through a high density retail corridor, there are now 3 cash for gold stores. Is this a sign of a temporary top? Is this a sign of the middle class desperate for cash? Last year there were none.
Great post, Jay...what are your current thoughts on buying a house? I'm roughly in the same boat...
I break it into positives and negatives and will bite when I think the positives outweigh the negatives for our family.
The positives, first, include peace for my wife, and, so, for me. She has been increasingly adament about setting down some roots and I see her point. Becoming members of the right community is a nice part of home ownership if you are inclined to live that way. Second, at some point inflation should make owning your own home worth the cost; depending on its condition, taxes and tax deductions, insurance, what your mortgage costs, factoring in the rate and downpayment, and general upkeep of the house. You have to balance these factors against rent costs and where you perceive rents to go in the future compared to a fixed mortgage and the other attendant costs of owning a home. Those costs are underappreciated by most owners in my mind.
Also, if we are only going to get high inflation and not a hyperinflation, which is, by far, the most likely outcome at this point, that inflection point for owning vs. renting based on purely economic conditions may be far off. Even in a hyperinflation scenario there are better ways to keep your purchasing power than housing. Owning your own home in that scenario is more about safety to me (and a place to bury your PM's.) The other positive about owning is that you can tweak your home for whatever you see as civilization's outcome in the future. Maybe you want to add geothermal or wind to be somewhat more energy independant; you won't do that to a rental. You might want to buy a place with arable land to set up a small farm and learn how to farm appropriately while there is time, especially if you feel that it might become more difficult to do that in the future. Or maybe you want a moat to keep out the hoards. ;)
There is also a possible debt play in that if you take out a mortgage at the right time, inflation could make that debt much smaller to you. That may also be an excellent play, it is how many American's got rich in the 70's. I would be careful about any leverage without understanding all of its ramifications to you individually and make sure you have an excellent protected cash stream to service it because you don't ever want to become someone's slave. Also, there is no reason that your debts can't be re-written by Uncle Sam in the future to reflect the lost power of the dollar. It has happened before in history during hyperinflations, so just be careful there in assuming too much. That said, I still think the debt play is doable for the right person.
One more negative includes being locked into one geographic location. Freedom of movement is a luxury few have at the moment. You should factor in your chances of moving and when. If you have the possibility of moving within 5 years, I would think twice about buying.
I'm sure there are other factors, but those come to mind off hand.
Gold May Break Out to Record, Grabham Says: Technical Analysis
Sept. 1 (Bloomberg) -- Gold may advance to a record $1,325 an ounce if it first breaks out of a symmetrical, triangular pattern, a move that may occur in the next one or two weeks, Standard Bank Group Ltd. said, citing trading patterns.
I gotta be honest, I am a technical analyst and yes EVERYONE is looking at the triangle pattern in gold and the miners, but to assume it will break to the upside is a bias I am not willing to take. However, simply stating a fact, September is the best month for gold seasonality with a price closing higher over 90%+ of the time with an average +2%, very strong seasonality indeed.
Just be aware there is a NAV premium on CEF (and GTU!) as well. They spiked during the panic. To check out what the current premium is, use something like ETFConnect:
Is it me, or are you even doom-ier than usual lately? Your comment implies the total demise of the US stock market, the US Dollar, and the USA. Am I reading you correctly?
Another recent post of yours talked about going postal. Maybe you could lighten up just a bit?
Jimmy
Dude, I WISH I was just moody or something. At this point it looks to me like calling a spade "a spade", unfortunately.
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