There is nowhere to hide in this market. At some point the expression, “there’s always a bull market somewhere” had to prove itself to be wrong. And now is the time. Save for bear funds, there is not a bull market anywhere. While waiting in cash, it is relevant for investors to observe the long term action of pure money as a function of more economically sensitive commodities. The picture painted by the long term charts is quite clear – hiding behind the economic slowdown in all its wealth-stealing ugliness is inflation.
Here’s the 5-year chart of an industrial metal – platinum versus pure money in the form of gold. The trend is clear, money is outperforming platinum.
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Similar is the relationship of gold to precious/industrial metal – silver.
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The relationship of gold to the CRB commodity index is also in a long term bull market. Real money is outperforming a basket of commodities.
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The long term bull market in oil priced in terms of real money is worth watching because it is at a critical point. Shown are the three lower highs which occurred since January of 2007.
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Here is another relationship at a critical point – that is the ratio of gold to the S&P 500. While it is providing little solace to those long of gold, it is important to long term investors whether this ratio chart breaks out of its 1 year trading range or if it is merely “overbought.”
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Things You’ll Never Read…
AP. “Addendum to House Bill on the $700 billion Bail Out
Added to the house bill was a clause that amends IRS regulations to retroactively tax officers of the 700 financial companies as follows. Any income derived from salary and sale of company shares at inflated market prices that were based on falsely booked profits from dubious loan activity from 2003 onward, shall be retroactively taxed by the government at a rate of 90%. Those individuals unable to come up with the tax money due to the retroactive nature of the tax shall be given the opportunity of a government loan to cover the tax which shall be paid back at variable rates over 10 a year period.”
This would be just and appropriate to the community. But as I said, this is a “thing you’ll never read.”
Today’s Market
All market indices were down substantially today and many are closely approaching their lows from Monday. The relationship of the bail out bill to the market action appears to be inverse serendipity. As the market sells off, the logical action of the public is to support that “something” be done to keep their “investments” from evaporating. This is in spite of their instincts which tell them that the bail out is wrong. If markets can be manipulated in the short term, they can be manipulated to sway public opinion – especially this public opinion. The lineup of pundits on cable with most supporting the bail out are sounding like hucksters and smelling like fish. Buffett surprisingly, is also a recent addition to this lineup. I’m escaping to baseball tonight!
