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In case you are an inventory market investor or a gold investor, or both, right now’s PROFIT CONFIDENTIAL is a should-read. Why? As a result of, by the time you’re completed reading this difficulty, you could very effectively be satisfied long-term that the stock market is going down and gold is going up. And you can also make some huge cash from these moves.
Let’s start with the necessary numbers all traders ought to pay attention to:

Inventory history first: The Dow Jones Industrial Common opened the 12 months 2000 at 10,786. The identical index ended 2010 at 11,577.50. In a nutshell, if you happen to have been an investor within the Dow Jones Industrial Average, your capital achieve appreciation over the previous eleven years would have been a paltry 7.three%. (No wonder we’ve all the time most popular micro-cap shares, penny stocks and small-cap stocks!)

Gold history 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 ounce-a achieve of 407% in 11 years.

Now, let’s fake you’ll be able to’t purchase the stocks that comprise the Dow Jones Industrial Common in U.S. dollars, but you’ll be able to solely buy them with gold bullion. Taking the numbers above, in 2000, it might have taken 38.5 ounces of gold to purchase the Dow Jones Industrial Average. On the end of 2010, if you take a look at the Dow Jones Snapshot, it would have taken solely 8.2 ounces of gold to purchase the Dow Jones Industrial Average. In different words, when measured in gold and not dollars, the value of the 30 huge shares that make up the Dow Jones Industrials has plummeted over the past decade.

Now, once we look back at nearly a century of knowledge in respect to the relationship between gold bullion and the Dow Jones Industrials (also known as the Dow Jones Gold Ratio), it will get actually interesting.

Within the interval from 1930 to 1949, a 19-year span, the worth of the Dow Jones Industrial Average measured in gold bullion was below 5.zero (during that 19-year period it would have taken lower than five ounces of gold to figuratively buy the Dow Jones Industrial Averages’ index).

In the period from 1974 to 1989, a 15-12 months span, the price of the Dow Jones Industrial Average measured in gold bullion was under 5.0 again.

As I began writing years in the past, with the sharp rise within the worth of gold because the yr 2000, I imagine we are entering one other multi-yr interval the place it’ll price lower than five ounces of gold to purchase the Dow Jones Industrial Average. To see that occur, the price of gold needs to rise sharply, or the inventory market has to come down, or each occasions need to occur.

Now the scary part: during the last century there have been three times when only one ounce of gold could buy the Dow Jones Industrial Average. If we’re headed close to that stage again (which I imagine we are), fortunes will likely be remodeled the next few years on the long aspect of gold and brief aspect of stocks.
Phrases of wisdom from our esteemed technical analyst, Anthony Jasansky, P. Eng., on President Obama inadvertently putting the brakes on the stock market rally:

“Cash talks and it has been speaking very loud after Uncle Ben began the cash printing presses at the old Fed in late 2008. He was so impressed by the results of the magical out-of-skinny air creation of $1.seventy five trillion-dubbed ingeniously as ‘quantitative easing (QE)’-that, within the fall of 2010, he cranked up the printing presses again, launching the $600-billion QE2.

“Though these huge money injections have been credited with reversing monetary and financial calamity, they still fell brief on some vital fronts. Among the many notable failings of QE are the anemic recovery in GDP, lack of growth in employment, continued weakness in residential and industrial real estate, the battered U.S. greenback, and unexpectedly larger yields of long-time period treasuries and bonds.

“When lately questioned on the effectiveness of QE, the Fed’s chairman has pointed to the strong stock market as one essential benefit. Without missing a beat, the U.S. President in his January 25 State of the Union speech mentioned the restoration within the stock market as being the results of authorities actions to stop a depression. Realizing how perverse the market could be, Obama’s bullish assertion could turn out be a timely signal for the stocks to take a deep breather.”

Where the Market Stands; The place it’s Headed:

Might the bear market rally in shares be over? In spite of everything, the Dow Jones Industrials immediately fell 166 points on Friday. Final Friday was a wake-up call for buyers and traders getting too cocky with this market. Shares don’t go up in a straight line week after week (as has been the case for most of December 2010 and this January).

Whereas I need to see extra action from the inventory market earlier than I throw in the towel on the bear market rally that started in March of 2009, I doubt the rally is over. This week opens with the Dow Jones Industrial Average up 2.1% for 2011.

Author: Dow Jones Chart