To: bull_dozer who wrote (205051 ) 4/1/2024 5:33:40 AM From: TobagoJack 2 RecommendationsRecommended By
Read Replies (1) | Respond to Gold and everything else …zerohedge.com Is Gold 'Cheap' Or 'Expensive' Relative To Stocks? the art of money management as being about how to decide when to move from full property (gold) to partial property (equities), and vice versa . And the time to return to money is when the growth prospects of shares are excessive, against either gold or energy."I may not be able to find the real value for gold, but I can perhaps determine if it is cheap or expensive versus the stock market." And for the capitalist system to work, we need a choice of at least two reserves of value. If there were only one, its value would be infinite (which happens when the local currency goes to zero).Since 1952, the ratio between the S&P 500 and gold has been flat, with a mean reversion occurring six times - three from gold being overvalued (fear) and three from the stock market being overvalued (greed). QED Pro subs can read the full paper here, but the following outlines his methodology... If an economy can be reduced to the concept of being “energy transformed”, gold can be considered as past excess savings invested in a generally accepted reserve of value. The S&P 500 itself represents the most efficient use of energy but its value could change abruptly if the price of energy were to suddenly rise or fall. In contrast, gold is antifragile because it tends to have a fixed value versus oil of around 17 barrels per ounce. Over time, there should be periodic convergences of the S&P 500, the gold price and the oil price. In fact, since 1972, they have converged three times, with the last one in 2015.They will likely converge again, probably sooner rather than later. If anyone can work out that timeline, they will have no problem investing their capital. Gave shows that gold is “undervalued” against the S&P 500 by a hefty -52% and -13% versus its own long-term trend . [url=] In contrast, the S&P 500 stands 33% above its own long-term trend level. Hence, at this point his preference based on the relative position of the two reserve assets is to favor gold, followed by equities. - For the foreseeable future, the world will favor energy consumers as expressed in the S&P 500 rather than the producers of energy, or indeed the inventory of past energy usage, as reflected in the gold price. - Very few people seem to expect a structural rise in the price of oil, as I do. - The same people do not expect a sustained rise in the inflation rate caused by a deficit in the production of primary energy. Those who do expect a new rise in inflation have already bought gold. - This overall scenario has been the consensus for about a decade. He concludes, "many people lost buckets of money investing in both equities and bonds between 1972 and 1982. Today, the markets are where they were in 1970: massively short of energy, short of gold and very long energy 'consumers'. It was not a good idea then. I am not sure it is a great idea now. " A fascinating approach, and we suspect pro subs will enjoy reading the full details of the study here...
