Posted on 11/28/2009 1:08:47 AM PST by dennisw
Gold is the immutable standard of value. Everything I watch is now sinking in relation to gold. And I'm talking about stocks, the Dow, the S&P, almost all the world's currencies, all the world's stock averages, most commodities, bonds, real estate, land, you name it. My old friend, James Dines calls it the "great stealth bear market," and he's been very right.
I could include relative strength charts of gold against all of the above items, but what's the use -- you get the idea. Against the standard, gold, the world is deflating, and no amount of paper-creation has been able to change that!
For some long-term perspective, the chart below shows the Dow in term of gold going back to the year 1999, Take your choice, you can call it the "stealth bear market" in the Dow," or the "stealth bull market" in gold.
Gold -- There's still loads of scepticism about the rising price of gold and the bull market in gold. It's been so long since the US public (since 1971) realized the gold was real, Constitutional money, that they don't know what to make of the gold action. They think gold near $1200 an ounce is expensive and they'd rather have dollar bills. I've coined the phrase, "dollar-bugs" for these ignorant Americans. I guess they'll have to get educated the hard way, which means holding on to their fading Federal Reserve Notes, no matter what. As far as I'm concerned, it's an amazing example of mass brain washing. "Hey, I'd rather have junk paper turned out by the Fed than the real thing -- gold." Pathetic. And the happy thought is that you can (legally) still swap your junk fiat paper for gold.
Richard Russell
Editor-in-chief - DOW THEORY LETTERS
9 times $1200 (gold price)= 10800
Which is approximately the DowJones average. Of course one must be more exact
By the end of 2010...I would imagine that Gold will hit $1800 an ounce. If so, the dollar will fall to a fantastic rate against every single currency (well except the Cuban peso). The interesting thing will be...purchase of American-made goods....will it finally take off and we become the new China? Was this the intended reason we allowed the dollar to fall?
From where will the capital for creating those manufacturing jobs come?
No
We have trashed and sold off too much of our industrial base
If you had asked me the same question 15-20 years ago my answer would have been much more positive
But a sinking dollar does have some good effect on our exports.
But it also makes imported oil more expensive
Was this the intended reason we allowed the dollar to fall?
No
We are flooding our economy with dollars to avoid another Wall Street/bank collapse and to stimulate the economy. This has juiced up the stock market too which makes people happier
The side effect of doing this is debasing the currency so the USD has been sinking for weeks. Obama, Bernanke, Guithner are willing to make this tradeoff. Most Americans never care about or give a thought about how strong the US Dollar is
please see my post #5
Perhaps we will have the opportunity to experience what the residents of Argentina, Brazil, and other Latin American countries have experienced:
http://www.tomchao.com/hb2.html
http://ideas.repec.org/p/cem/doctra/69.html
http://www.sjsu.edu/faculty/watkins/brazilinfl.htm
http://www.thefreemanonline.org/columns/hyperinflation-lessons-from-south-america/
The value of the dollar does not directly affect the price of oil since oil is traded in US dollars worldwide. This why periodically oil exporting nations talk about pricing oil in a basket of currencies.
That's probably a good estimate - would be 33%(+) increase.
BTW, if you own gold and the Dem's lose big next November, gold will drop big-time and look for the GOP candidate to win in 2012.
Same thing happened in 2002 and 2006.
In 2002, GOP won big at mid-terms and Bush was re-elected two years later.
In 2006, Dem's won big at mid-terms and Obama was elected president two years later.
“From where will the capital for creating those manufacturing jobs come?”
Ah, that’s the rub isn’t it! This Administration is intentionally destroying our economy.
The chart would be more impressive if it weren’t “semi-log”.
Also keep in mind that the Dow used to represent real companies that produced things. These days it mainly represents “service industries”, with a few exceptions.
I was thinking the same thing.
It is called the Dow Jones Industrial Average because it was originally composed of the 11 expanding to 30 top industrial corporations with an exception or two. Look at it today and there is no US Steel or GM.
http://finance.yahoo.com/q/cp?s=^DJI
Today out of 30 DJIA components you have 6 real industries and 3-4 kinda industries
COMPONENTS FOR ^DJI
Symbol Name Last Trade Change Volume AA ALCOA INC 12.66 Nov 27 0.34 (2.62%)
15,567,595 AXP AMER EXPRESS INC 40.84 Nov 27 6,005,391 BA BOEING CO 52.45 Nov 27 3,281,352 BAC BK OF AMERICA CP 15.47 Nov 27 96,712,639 CAT CATERPILLAR INC 57.45 Nov 27 5,189,544 CSCO Cisco Systems, Inc. 23.38 Nov 27 21,773,858 CVX CHEVRON CORP 78.17 Nov 27 5,649,677 DD DU PONT E I DE NEM 34.40 Nov 27 2,594,556 DIS WALT DISNEY-DISNEY C 30.35 Nov 27 5,688,000 GE GEN ELECTRIC CO 15.94 Nov 27 60,917,551 HD HOME DEPOT INC 27.61 Nov 27 7,517,737 HPQ HEWLETT PACKARD CO 49.07 Nov 27 9,948,935 IBM INTL BUSINESS MACH 125.70 Nov 27 3,319,189 INTC Intel Corporation 19.11 Nov 27 35,747,631 JNJ JOHNSON AND JOHNS DC 62.89 Nov 27 6,081,102 JPM JP MORGAN CHASE CO 41.33 Nov 27 26,230,027 KFT KRAFT FOODS INC 26.64 Nov 27 4,468,515 KO COCA COLA CO THE 57.18 Nov 27 7,837,689 MCD MCDONALDS CP 63.60 Nov 27 3,557,849 MMM 3M COMPANY 76.75 Nov 27 1,865,886 MRK MERCK CO INC 36.29 Nov 27 8,971,830 MSFT Microsoft Corporation 29.22 Nov 27 29,357,892 PFE PFIZER INC 18.25 Nov 27 22,830,294 PG PROCTER GAMBLE CO 62.48 Nov 27 6,195,459 T AT&T INC. 26.99 Nov 27 16,259,375 TRV THE TRAVELERS CO 51.65 Nov 27 2,433,045 UTX UNITED TECH 67.20 Nov 27 2,598,992 VZ VERIZON COMMUN 31.63 Nov 27 8,552,212 WMT WAL MART STORES 54.63 Nov 27 7,528,648 XOM EXXON MOBIL CP 74.87 Nov 27 12,105,203
Is there a link for this article? And where did the chart come from?
My understanding is that gold and oil appreciate and fall against the dollar
Due to both having world wide pricing and market that is pretty uniform.....
Such as a the gold price will be the same here as in India
Such as a particular grade of oil will be the same in USA as India
As far as I know when the USD tumbles it goes down relative to other currencies
It goes down relative to gold
It goes down relative to oil
All don't move in lockstep but the uniform movement/trend can be seen
Nice insight. Although most of us have known and said this for a long time, there's nothing like the explicit blatant example of the Dow, if true, to relay the message to even the most obtuse phony Obama type.
Gold is another matter because is viewed as a store of value, protection against inflation, financial failures or political uncertainties. However, there have been extended periods of steady or even declining gold prices even events one would expect the price of gold to rise. Yesterday was a good example theory would suggest that the events in Dubai should have driven the price of gold upwards, but the price of gold actually declined and even though the Us Dollar Index has been falling since March the dollar suddenly became a safe haven.
Oil exporting countries absorb more of the pain of a weakening dollar because the dollars received from their exports lose purchasing power in other markets, i.e. goods produced in Japan or in the Common Market.
An Arab oil seller can sell his USD payments instantly and move into the currency of his choice. It they are absorbing the pain of a weakening USD this is a political decision...Made to stay on our good side. To create good will because we defend them. Dittos for Nippon. They never dump dollars because we defend them. There is an understanding. Korea and Taiwan act similar to Japan. We are their bulwark against the ChiComs
A cardinal principle of finance is to own real assets in inflationary periods and to own financial assets in deflationary periods. Look at how bonds performed from Reagan to Bush, a period when inflation was falling and bond prices were rising.
As far as oil exporting being able to swap out of dollars why do oil exporters push for a basket of currencies for setting the price of oil.
It should be noted that rising oil prices have a positive influence on the stock market, even if increases the cost of doing business in other sectors, because about 29% of the S&P 500 index is composed of the oil industry.
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