Gold News

Gold, the Dow & a Mojito

Forecasts for the Dow/Gold Ratio, plus a cocktail recommendation...


"WHAT IS
your favorite government agency, and why?"

"What are the two largest holdings in your own personal wealth?"

"What is your trade of the new decade [best long and short idea for the next ten years]?"

"Where will the Dow and gold be a year from now...and what is your favorite chilled beverage?"

The questions came on thick and fast at last night's "rough and tumble" Whiskey Bar Debate here in Vancouver, writes Joel Bowman for Bill Bonner's Daily Reckoning, currently gathered with readers and contributors alike for the 11th Agora Investment Symposium.

If you've attended our little shindig before, you'll know what it's all about. If you haven't yet partaken in the feistiest chapter of our annual symposium, we basically get our most outspoken, controversial contrarians liquored-up and hit them with a slew of attendee-penned questions.

Here's a taste of what went down when the Trade of the (New) Decade question popped up, as relayed by our mates over at The 5-Minute Forecast:

John Mauldin – Buy emerging markets, sell sovereign debt...but not now. Treasuries are going to go lower in the short term;
Andrew Lowenthal – John is 100% right: Rolling over US debt is going to be so much easier than what people think...it's too early to short Treasuries;
Eric Kraus – Buy resource producers in places where people are afraid to invest. Short finance sectors of developed countries;
Barry Ritholtz – Short the Euro, long stocks in 2016, when the next bull market begins;
Byron King – Sell the Euro: It's doomed, just a question of time. Buy crude oil. There's just not enough of it. I'm long the Tea Party, too;
Doug Casey – I'm inclined to own a lot of gold, cattle and agricultural land...keep it simple. I would short the Euro, Yen and US stock market;
Gary Gibson – I own nothing. If I had anything, I would have Dollars now, uranium later. Buy energy;
Eric Fry – Short Euro, long uranium;
Porter Stansberry – There are just too many good shorts. Short Treasuries, especially in US and Italy. Buy Gold, silver, timber and super-high-quality blue chips when they yield 10% or more;
Chris Mayer – Short the state of California and Illinois. Long uranium and high-quality farmland.

The gold/Dow/chilled beverage question also yielded some colorful responses from the panel: Gold at $1800 per ounce...Dow down 20%...and Mojitos...

Not being a member of the distinguished panel, I didn't throw in my 2 cents last night, so I'll do so now. But instead of measuring the index in points and the metal in Dollars, we'll do away with floating abstractions and simply measure the index in metal.

Historically, the peak of a Gold Bullion bull market/stock-market bear occurs when you can pick up the 30 bluest of blue-chip US equities for about one, maybe two, ounces of gold.

The Dow/Gold Ratio, at that point in time, will stand between 1:1 to 2:1. Whereas, during the furor of tech mania in the late '90s, when the Midas metal was scoffed at in polite company, that ratio reached 45:1. During the past decade, however, as stocks stagnated and gold rallied fourfold, that ratio has slipped dramatically.

Today, it takes about 8.6 ounces of gold to buy the Dow Jones Industrial Average. And our bet, for what it's worth, is that this trend continues for a while yet. Next year, we're probably looking at a Dow/Gold ratio of about 6:1...and not because the Dow goes to 60,000.

Oh yes, and we'll take a caipirinha.

Buying Gold today?

Bill Bonner has co-authored a number of New York Times Bestsellers including Financial Reckoning Day, Empire of Debt and Mobs, Markets and Messiahs. In his own opinion, Bill's most recent title, A Modest Theory of Civilization: Win-Win or Lose, is his best work yet. Bill also founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group have exposed and predicted some of the world's biggest shifts since that time, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and more recently the election of President Trump.

See full archive of Bill Bonner articles

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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