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Hello, thanks for opening the door to this site for me.
Regarding the Dow/Gold chart, I prefer this log version as I think it is visually more compelling but of course the same story.
http://www.macrotrends.net/1378/dow-to-gold-ratio-100-year-historical-chart
I find this chart important because it is relatively clean with clear and sustained moves over long periods of time between competing asset classes – elevator down (stocks dn gold up), escalator up (stocks up gold dn). The stalls or temp reversals in trend are largely due to non-(free)market interventions.
I started following this ratio in 2013 and noticed the downward trend (gold up more than stocks) was reversed (temporarily IMO) with the sustained onset of QE which has completely mispriced US market RISK. I expect the downward trend will resume once CB’s are out of ammo (like about now with the progressive onset of NIRP and PM’s FINALLY reacting to true RISK) however this time I believe with a vengence – it will have a much steeper slope than ’01-’07 and it’ll move so fast ppl won’t know what hit them and they’ll think the move is over but it won’t be. I’d expect this ratio to at least hit and possibly exceed the 1.4 low given the increased magnitude of risk (per James Rickards’ complexity theory).
Anyhow that’s my first post. Thanks again :).
Hi YYZ, are you fan of Rush by any chance? 😉
Anyway, I agree that the log version is a better chart to view, mainly because the variation in DOw:Gold is about a factor of 40 and in those cases a log chart is just more sensible.
Also, such a chart shows better what we would actually see as equal moves in % terms which diverge from nominal moves an awful lot as you get to large variations. What would we consider to be an ‘average ‘ Dow: Gold ratio or a median Dow:gold ratio for instance? If we have a range of 1 to 43, the the arithmetic mean value is 44/2 or 22. That’s way too high. The geometric mean though is square root of 43, which is about 6.56. On the chart you link to, it’s obvious that it is somewhere between 5 and 10 and not 22!
Anyway, I also like the Nick Laird chart because it shows equivalent figures for the 1800-1900 period also but I am not sure how they are calculated and you can see the gentle uptrend that contrasts sharply with the megaphone that has come since the 1920s.
My target: 0.7 but by that time, we may be in a casdhless and goldless ‘society’ – a ‘Brave New World’ indeed.
Yes, it wasn’t until Presure/Grace that I realized what I was missing. I’m going to take another look at that Laird chart. Thanks.