My guess is somewhere in the 4500 area for convergence between INDU and Gold. It will require however that we get into the nastiest part of the resource constraint era, which imo roars again starting in late 2011 and has its own crisis window in 2012-2015. (BTW, did you see Grantham is now finally on board with the whole population-resource depletion thesis?).
The most important macro concept to bring with you into the resource depletion crisis is the notion of real, not nominal, energy and resource supply. We'll have oil, NG, food, and copper. But the energy-cost, fertilizer-cost, and water-cost to get all those things will squeeze the margins away from producers and lead to wide-band volatility in price as a kind of new norm.
In this environment, the real earnings from companies will decline further. That will likely form the real, actual, fundamental case for an INDU at 4500, if not lower.
If we continue to see Gold as the money that balances out a world going into overall resource yield decline (real yields of all resources in decline) than the INDU-GOLD ratio probably breaks parity, and Gold does an overshoot, at least for a while.
Things will eventually improve. I see something approaching world normalcy again by 2020. The debt will be gone, there will be lots of utility grade solar. Transport will mostly be electrified. Plane and car transport will be marginal. Ships will be the means to get across oceans. Food supply will be a OK.
Hey, I almost sound like an optimist.
G |
