Tuesday, November 11, 2014

keepin' it real with dow and gold

ok, i admit it. i'm a little freaked out with the market at all time highs and gold sinking to the center of the earth. but are the numbers faking us out? yes! i would argue. this is because the ratio of the dow to gold is only 15. since gold is considered a constant store of value, the dow/gold ratio is what economists look at when they want to back-out inflation and central bank intervention. here's the picture:

dow / gold study (source chart of dow-gold is hidden)
in prosperous times the dow/gold ratio ranges into the 20's and 30's. we are not even back to the levels we were at before the housing bubble burst. so if you're thinking the market has flown too high and gold too low, think again!

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