Gold’s strength with relative base in dollar is sign of excess liquidity that can continue to drive stock market higher but for how long?
Sam Adelton
Nov. 4, 2006

When money gets abundantly available for those with little innovation they keep investing. The biggest investment hoes in stocks and these days the next after that are the hedge funds. The fact that Gold is showing strength again with no real collapse in Dollar, tells a lot about liquidity. The liquidity is abundant. That can push gold, stocks and commodities to unprecedented levels. Gold will be the biggest gainers, commodities will be next and stock also will gain. The stock market will eventually suffer from this ongoing stealth inflation with lack of real growth – we call it stagflation.

Stock market eventually is a function of corporate earnings. Corporate earnings cannot go up indefinitely when commodity prices are doubling and the finished out prices are declining because of stagflation. Eventually the stock market will suffer. It is actually suffering but no one knows about it.

If you divide the stock price with the price of gold, you get the picture clear. How much ounce of gold does it take to buy one unit of Dow Jones Industrial Average? Today with Dow around 12,000 and Gold around $625 an ounce, it takes approximately 19 ounces of gold to but one unit of Dow Jones Industrial Average. In 2000, it took 33 ounces of Gold to buy the same. It took 5 ounces of gold to buy the same in 1987. What this shows is that the stock market really topped out in 2000. It is in a stealth bear market trying to draw every common person in the main street to dump the stocks on them.

Most probable scenario is that gold prices will accelerate much faster than stocks. In 2008 even with higher stock prices it will take 14 ounces to buy one unit of Dow. By 2012 it will take 4 ounces of gold to buy the same.

The lack of gold standard is creating this stealth in the bear market of the stocks. But smart money is investing in gold instead holding the currencies, bonds and stocks.

Gold’s strength with relative base in dollar is sign of excess liquidity that can continue to drive stock market higher but for how long?
Sam Adelton
The lack of gold standard is creating this stealth in the bear market of the stocks. But smart money is investing in gold instead holding the currencies, bonds and stocks.
READ MORE>>

Dow 5000 or 20000 – the classic fight between fundamentals, corporate earnings, interest rates and sentiment
Peter Oberois
The market has severe bullish sentiment. In that situation two things can really happened.
READ MORE>>

The way to cut taxes, reduce budget deficit, reduce long-term rates and push the economy to new heights is to award public contracts prudently
Laura Johnson
We need tax cuts at all levels. We want smaller Government. We also want compassionate approach to those who are socially and economically disadvantaged. How can do it all?
READ MORE>>

Dow plunged below 12,000 – Wall Street believes its oil price but quantitative models manifest recession
Fred Day
There are some risks for the bears too. The dumb money is plenty and that can keep pushing the market higher till one or two big players are left....
READ MORE>>

MORE ARTICLES >>