September 27, 2023

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Dow Jones Gold Ratio: Making Money from this All-Important Indicator

If you are a cows hawk moneyman or a gold investor, or both, todaysPROFIT CONFIDENTIALis a must-read. Why? Because, by the juncture you are absolute itemizing this issue, you could uncommonly well be convin

Dow Jones Gold Ratio: Making Money from this All-Important Indicator

If you are a beasts market tycoon or a gold investor, or both, todaysPROFIT CONFIDENTIALis a must-read. Why? Because, by the instance you are absolute declaiming this issue, you could thumping well be convinced long-term that the cattle peddle is going down and gold is going up And you can make a heap of monetary from these moves.

Lets onset with the noted numbers all investors should be aware of:

Stock chronicle first: The Dow Jones Industrial Average opened the year 2000 at 10,786. The equivalent list foregone 2010 at 11,577.50 In a nutshell, if you were an investor in the Dow Jones Industrial Average, your monetary benefit appreciation over the past 11 years would keep been a trifling 7.3%. (No wonder we retain always preferred micro-cap stocks, penny stocks and small-cap stocks!)

Gold epic now: At the start of the year 2000, gold bullion was trading at $280.00 per ounce Gold bullion closed out 2010 at $1,422 per ouncea good of 407% in 11 years

Now, lets pretend you cant 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 obtain taken 38.5 ounces of gold to buy the Dow Jones Industrial Average At the end of 2010, it would keep taken only 8.2 ounces of gold to buy the Dow Jones Industrial Average In additional words, when measured in gold and not dollars, the value of the 30 colossal stocks that make up the Dow Jones Industrials has plummeted over the former decade

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Now, when we look back at almost a century of information in obedience 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 interval from 1930 to 1949, a 19-year span, the emolument of the Dow Jones Industrial Average measured in gold bullion was below 5.0 (during that 19-year word it would have taken less than five ounces of gold to figuratively buy the Dow Jones Industrial Averages index)

In the phrase from 1974 to 1989, a 15-year span, the charge of the Dow Jones Industrial Average measured in gold bullion was subservient 5.0 again

As I started writing years ago, with the harsh incline in the charge of gold since the year 2000, I assume we are entering another multi-year name where it commit payment less than five ounces of gold to buy the Dow Jones Industrial Average. To see that happen, the fee of gold needs to acclivity sharply, or the cattle hawk has to come down, or both events deprivation 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 familiar to that standard again (which I suppose we are), fortunes will be made over the subsequent few years on the crave company of gold and brief side of stocks.

Michaels Personal Notes:

Words of wisdom from our famous specialist analyst, Anthony Jasansky, P Eng, on President Obama inadvertently putting the brakes on the stock doorstep rally:

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Money talks and it has been speech extremely flashy after Uncle Ben started the capital printing presses at the former Fed in behind 2008. He was so impressed by the contact of the magical out-of-thin air world of $1.75 trilliondubbed ingeniously as quantitative easing (QE)that, in the dive of 2010, he cranked up the printing presses again, launching the $600-billion QE2.

Though these two giant capital injections retain been credited with reversing capital and economic calamity, they inactive fell laconic on some famous fronts. Among the mogul failings of QE are the anemic atonement in GDP, lack of growth in employment, continued weakness in residential and commercial TRUE estate, the battered U.S 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 bovines vend as one revered good Without lost a beat, the US. President in his January 25 State of the Union conversation mentioned the redemption in the beasts vend as being the result of government actions to stop a depression Knowing how headstrong the sell can be, Obamas bullish assertion may turn out be a timely pronounced for the stocks to move a deep breather

Where the Market Stands; Where its Headed:

Could the bear sell organize in stocks be over? After all, the Dow Jones Industrials suddenly fell 166 points on Friday. Last Friday was a wake-up call for investors and traders receiving too cocky with this vend Stocks do not go up in a long row week after week (as has been the situation for most of December 2010 and this January)

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While I deficiency to see additional travel from the cattle market before I hurl in the towel on the bring doorstep organize that started in March of 2009, I vacillate the marshal 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, construe the headline in last FridaysUSA Today What do they know that I dont? They understand what realtors and their associations notify them and thats about it Unfortunately, the veritable estate information is predominately written by reportersnot legitimate estate investors with years of experience to share. The difficult announcement about the TRUE estate doorstep in the US. are truly scary How can the US economy flee the hard landing in U.S home prices? As well soon find out, it simply cant! Michael Lombardi inPROFIT CONFIDENTIAL, January 31, 2007. While the appealing media was predicting a bottoming of the veritable estate doorstep in 2007, Michael was preparing his readers for the worst of times ahead