Thursday, December 9, 2010

Priced in Gold, the So Called S&P 500 Rally is a Dud!

Dear readers,

Chart provided by and Jesse's Café Américain

For those who continue to ignore the fact that Gold is "money," not an investment, here is a chart of the S&P 500 index priced in Gold. As you can see the "rally" is not very impressive when priced in Gold.  The big illusion is that the "price" of Gold is going up. As we have been saying for some time now, Gold doesn't change. An ounce of Gold today is the same ounce of Gold a thousand years ago, the difference is the quantity of dollars it takes to buy that ounce of Gold. So it's not about Gold it's about the dollar losing value against Gold and other commodities. There are many who misunderstand Gold, it is not supposed to have a cash flow, P/E ratio, dividends or pay interest because it is money! Does the Canadian dollar pay dividends or interest? NO! Gold is a form of cash and people go to Gold when "confidence" in government and markets is lost. It is the last resort currency to protect ones wealth. Throughout history governments around the world have used Gold as a backing to their currency, and there's a reason for it. Which is a whole different topic all together.
Basically Gold is a barometer of fear in the market and those who choose to ignore the fact that the financial system is broken will suffer the consequences because I assure you that the powers that be or the "internationalists" know what's happening and they own Gold, and the physical bullion not paper substitutes. Just listen to Peter Munk's comments in the Charlie Rose interview below, he says that his billionaire friends have concerns about the markets and they're going to Gold. Even in Davos 2009 Mr. Munk was telling us the same thing. We agree that a high Gold price is not a good sign for the economy and the markets but we cannot ignore the facts, Gold has been the best performing asset class in the past ten years and all the fundamental signs are pointing to a much higher price. Just ask yourself what will be the result of all the bailouts, stimulus and Quantitative Easing (QE) that the FED is creating? It surely hasn't returned any jobs to America and Chairman Ben Bernanke even admits it in his recent 60 Minutes interview.
There is a big difference between being optimistic and realistic, we choose the latter and hope that we're wrong, because when you plan for the worst and hope for the best, and the worst happens, then it's not good for anyone, but at least you would have protected your wealth with Gold.   BK