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Thread: another highly interesting chart - S&P 500 priced in Gold

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    Default another highly interesting chart - S&P 500 priced in Gold



    (snip)"There were a few questions raised about the note on the long term chart of the SP 500 deflated by gold which was posted last night, and which is reproduced here on the right, which read "This is why the financial engineers like Bernanke hate and fear gold; it defies their plans and powers."

    The chart shows something that most investors have suspected. There has been no genuine recovery in the price of stocks since the decline that cannot be fully explained by the monetary inflation of the dollar, as can be discovered by the ultimate store of value, which is gold.

    I thought that this was a fairly straightforward observation, but it apparently jarred a few people and their thinking. So perhaps we have some new readers who are not familiar with the long standing animosity towards gold that is uniformly expressed by all those who promote centralized command and control economies, from both the left and the right.

    Can any astute observer doubt the Fed's desire to act in secret and privacy? Their obsession with this is almost unbelievable and beyond comprehension, unless one understands that they are in a 'confidence game,' and use persuasion and even illusion to shape perceptions, especially at the extremes of their financial and monetary engineering of the real economy.

    This animosity and desire for secrecy was described by Alan Greenspan in his famous essay, Gold and Economic Freedom, first published in 1966. In a fairly amusing exchange between Congressman Ron Paul and the former Chairman a couple of years ago, Mr. Paul asked Sir Alan about this essay, and if he had any corrections or misgivings about it after so many years. Would he change anything?

    "Not one word." replied Greenspan.

    It helps to understand the dynamics of the money world, which appear so mysterious to those who do not specialize in it, even economists, although they often feign ignorance to promote some cause or avoid unpleasant disclosure.

    Money is power. Ownership of the means of production may provide for the control of groups of disorganized labor, but the power of the issuance of money allows for the control of whole peoples and governments, through the distribution and transference of wealth, by the most subtle of means. And this is why the US Constitution relegated this power to the Congress and by their explicit appropriation, and denied it to the States and private parties except in the form of specie, that is, gold and silver which have intrinsic value.(snip)

    from

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    Default Re: another highly interesting chart - S&P 500 priced in Gold

    You could do the same thing by using petroleum or pork bellies as a base. What celestial insight would that yield?
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: another highly interesting chart - S&P 500 priced in Gold

    ^^^ actually, it would yield the very same conclusion ... that when people make the serious mistake of attempting to use dollars as a 'yardstick' for measuring true value, they delude themselves.

    Gold, oil, pork bellies etc. have not gone up in terms of true value, the US dollar has gone down ! S&P stock shares have not gone up in terms of true value either, as reflected by their increased US dollar denominated price times a devalued US dollar basically equalling some constant ! The same delusional principle applies to 'increased' retail sales statistics, to 'increased' GDP statistics etc.

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    Default Re: another highly interesting chart - S&P 500 priced in Gold

    If the water level in the marina drops and my boat stays afloat, chances are it will stay afloat in the lake as well. Fact is there is no absolute value for anything. If you had invested in the computer hard-drive commodity 3 years ago (and your stored hundreds of skids of them), you be have a big loss now, because you forgot to sell them at market. Gold goes up because of fear of the unknown, not JUST because the dollar goes down in terms of some other currencies. A lot of currencies have faltered even moreso than the dollar.
    Besides the dollar, like all currencies, should rise and fall, depending on the market. Otherwise other currencies are not being treated equitably.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: another highly interesting chart - S&P 500 priced in Gold

    Besides the dollar, like all currencies, should rise and fall, depending on the market. Otherwise other currencies are not being treated equitably.
    This would be a valid point if EVERY currency 'played' by world market rules. However, in point of fact many do not. The prime example of course is the Chinese Yuan ... which is held at a hard peg ratio to the US dollar via active intervention of the Chinese gov't in world currency markets on a daily basis. By 'spending' gov't money to maintain this ( artificially low vs market ) exchange rate peg, the Chinese assure that their export products ( i.e. goods ) are available to world markets at an 'apparent' price that no other country's export products ( i.e. goods ) can touch.

    Another prime example is the indirect US dollar exchange rate manipulation via interest rates set on US treasury bonds. By 'spending' gov't money to maintain ( artificially low vs market ) interest rates, the US Fed assures that their primary export product ( i.e. US gov't debt ) is available to world markets at an 'apparent' ( artificially high , since bond prices are reciprocal to bond interest rates ) price that no other country's gov't debt products can match.

    If you slide sideways to look at the problems befalling the PIIGS, you can see what happens when individual countries are no longer able to 'manipulate' currency values. Based on common use of the Euro, the productivity of Greece, Spain, Ireland etc. must then be accurately compared on an equal basis to the productivity of Germany, France etc. even though the valuation of the Euro may be a 'moving target' overall. For better or worse, there is no equivalent method of comparing relative 'non-manipulated' valuation of the US dollar in a similar fashion. Thus the author simply chose to select the valuation of gold as an alternate 'yardstick' - since changes in the price of gold as denominated in different currencies does provide a means of relative value linkage - in a manner similar to your previous attempted example of 'a rising tide lifting all boats'.

    However, consider that gov'ts actively manipulating currency valuations and / or imposing trade restrictions and / or providing gov't subsidies could be considered the functional equivalent of 'pumping water uphill' and/or providing dams and locks for your lake. In that case, while 'sea levels' may be dropping, a boat located in that lake ( protected by locks / dam / redirection of natural water flows) will continue to float. But removing those gov't supports will immediately cause that boat to be washed down river and out to sea to be crushed on the rocks !!!

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    Default Re: another highly interesting chart - S&P 500 priced in Gold

    interesting to try to take all that in, but...

    The price of gold is related to the level of the seas when a bad storm hits: Downwind the seas rise and upwind the seas sink. If you are in the wrong place your boat may come to rest on the rocks because you did not attempt to sail away the storm our of fear your small boat may capsize due to the high winds.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: another highly interesting chart - S&P 500 priced in Gold

    If you are in the wrong place your boat may come to rest on the rocks because you did not attempt to sail away the storm our of fear your small boat may capsize due to the high winds.
    ^^^ which is exactly why rich Greeks have been 'sailing away' their business profits to tax havens ... because having to actually pay the tax rates imposed by the Greek gov't would 'sink their boats' ! Which is exactly why American manufacturers have been 'sailing away' their manufacturing processes to Asia, why American agricultural producers have been 'sailing away' their vegetable production to Mexico, why American software houses have been 'sailing away' their intellectual property to Ireland etc. ... because having to actually pay US minimum wage, US environmental and worker safety costs, US corporate taxes etc. would 'sink their boats'.

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    Default Re: another highly interesting chart - S&P 500 priced in Gold

    So China becomes a "loss leader" on the value of their Yuan, and we all flock to the fire sale. Who knew?

    What your chart says to me is that the "real" value of the S&P (which had previously been sailing on a very high temporary wave) had very rapidly almost sunk out of sight until April 2009 when some extra buoyancy was added. This buoyancy has prevented it sinking almost unrecoverably to the bottom of the sea. Perhaps its present waterline is about near its real waterline. And it is now riding the waves, as was its intended performance characteristic.

    My real concern is what happens when the next BIG wave comes along and the S&P rides unstably on it for while. Can it recover then? What will buoy it up then?

    If you get my drift....
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: another highly interesting chart - S&P 500 priced in Gold

    What your chart says to me is that the "real" value of the S&P (which had previously been sailing on a very high temporary wave) had very rapidly almost sunk out of sight until April 2009 when some extra buoyancy was added. This buoyancy has prevented it sinking almost unrecoverably to the bottom of the sea.
    the technical term you're grasping for is 'US taxpayer bailout guarantees' ... although this occurred under various different names i.e. TARP / Maiden Lane / ZIRP


    Perhaps its present waterline is about near its real waterline. And it is now riding the waves, as was its intended performance characteristic
    Perhaps ... but perhaps there is also a tit fairy !

    While there were highly publicized repayments of TARP loans ( prompted by threats of banker salary caps ), NOTHING has changed for the better in terms of Maiden Lane or ZIRP. In fact, ZIRP is getting worse due to record levels of US treasury bond printing / auctions. Functionally speaking, there is very little difference between the US gov't handing 'free money' to Wall St. banks, versus the US gov't printing an equal amount of 'free money' but using it to buy down interest rates instead ( thus increasing Wall St's 'spread' = profit margin ). Practically speaking, the latter is far more stealthy and far more difficult for the typical US registered voter to absorb.

    Back to your point - what's likely to happen when this flow of gov't freshly printed 'free money' stops ? You can't talk about Wall St.'s boats having reached their 'real waterline' until it does.

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    Default Re: another highly interesting chart - S&P 500 priced in Gold

    TARP and stimulus problems as I see them from an investment standpoint (as if there were a real alternative) :

    • some of the stimulus money was not very well-directed at all (not complaining about the timing)
    • the bailouts were just too free-form and should have been directed at the real intent.
    • should have been some sort of cap on management salaries as long as they had use of the. bailout.
    • should have been a massive overhaul of the SEC and maybe the Fed.
    • FBI should have been called in to investigate fraud and diversion.
    • should have been some plan to cut other expenses to partially compensate.
    • should have been and still be a ban on earmarks and plan to allow line item vetoes under this emergency.
    • should have been a LOT more voter education on who did what and why/how each provision was going to be implemented
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: another highly interesting chart - S&P 500 priced in Gold

    ^^^ again you are assuming that the TRUE purpose of last year's $787 billion 'stimulus' package was actually economic stimulus. The 'gold foil hat' crowd would point out that the single largest category of 'stimulus' expense was block grant / supposed medicaid subsidy money to particular states i.e. California, Illinois, Michigan, NY, NJ etc. - which in real world terms amounted to a wealth transfer of federal tax revenues collected from taxpayers living in other states to partially 'bail out' the states I listed. And that's before we start to talk about the 'earmarks' ... which were heavily skewed towards the states I listed as well.

    As to the issue of voter education, politicians clearly understand that this is a 'two edged sword'.

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    Default Re: another highly interesting chart - S&P 500 priced in Gold

    Quote Originally Posted by Melonie View Post
    the technical term you're grasping for is 'US taxpayer bailout guarantees' ... although this occurred under various different names i.e. TARP / Maiden Lane / ZIRP

    Perhaps ... but perhaps there is also a tit fairy !
    The bailout wasn't a bailout forr taxpayers; it was a bailout for the largest corporations that had gotten into trouble thru their own misdirection.

    (However, if you could put me in touch with that tit fairy, I'd be eternally grateful.)
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: another highly interesting chart - S&P 500 priced in Gold

    Quote Originally Posted by Melonie View Post
    ^^^ actually, it would yield the very same conclusion ... that when people make the serious mistake of attempting to use dollars as a 'yardstick' for measuring true value, they delude themselves.

    Gold, oil, pork bellies etc. have not gone up in terms of true value, the US dollar has gone down ! S&P stock shares have not gone up in terms of true value either, as reflected by their increased US dollar denominated price times a devalued US dollar basically equalling some constant ! The same delusional principle applies to 'increased' retail sales statistics, to 'increased' GDP statistics etc.
    No, gold has gone up in terms of true value. The dollar's value is about the same. Inflation is around 0%. Most products have not gone up in price. I just leased a new Honda Civic this year, and I paid less than I did for the last one I leased three years ago. The price of housing has dropped considerably. I've been paying the same amount for food and clothes as I have for the past several years. Anyone who had invested in the S&P 500 a year ago is much, much better off financially than they were a year ago.

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    Default Re: another highly interesting chart - S&P 500 priced in Gold

    Most products have not gone up in price
    in terms of 'non-essential' products, this is probably true. If typical middle class incomes are stagnant, and if more money must be spent on 'essential' items from taxes to food to energy, that leaves less money to be spent on lap dances and flat screen TV's. Thus the 'sellers' of lap dances and flat screen TV's lack the market 'leverage' to raise prices in an environment of declining sales volume ( even though their costs of doing business are increasing ).

    I just leased a new Honda Civic this year, and I paid less than I did for the last one I leased three years ago
    You can partially thank US taxpayers for that ... since the FED has been spending their tax money to 'buy down' interest rates. You can also thank Honda stockholders who are accepting a smaller profit margin in order to maintain market share versus gov't subsidized GM and Chrysler.


    Anyone who had invested in the S&P 500 a year ago is much, much better off financially than they were a year ago
    this is obviously true over the specific time frame you selected. It is NOT true over longer or shorter time frames.

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    Default Re: another highly interesting chart - S&P 500 priced in Gold

    ^^ I can only think of one dancer who's several lapdances would be worth a flat-screen HDTV.

    Over the period March 2008 to March 2010 the market has gone downhill, but over the last year the market has risen quite a bit. With the increased market activity, the financial institutions (many of which caused this crash) have benefitted greatly. I must say that this is not because of their hard work; it is because individual investors and pension (401-k etc) managers are trying to recover their lost value. As for the market, it is just as crooked as ever.
    Last edited by threlayer; 05-22-2010 at 07:24 PM.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: another highly interesting chart - S&P 500 priced in Gold

    Over the period March 2008 to March 2010 the market has gone downhill, but over the last year the market has risen quite a bit
    ^^^ again you are drawing a conclusion based on the use of a non-constant valued US dollar as your yardstick !



    at the apparent US stock markets peak in March 2008 the US dollar index was only at 71 or so. At the apparent 'bottom' a year later the US dollar index had risen to 90 or so. During the subsequent apparent recovery through the end of 2009 the US dollar index fell back to 74 or so. This isn't to say that US stock market values did not rise and fall from the perspective of foreign investors. But they rose and fell far less as measured by different currencies a.k.a. as measured in US dollar 'purchasing power' rather than as measured by raw US dollars.

    Don't you love our new global economy ... where every currency is now based on 'shifting sands' ?

    ~
    Last edited by Melonie; 05-22-2010 at 01:03 AM.

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    Default Re: another highly interesting chart - S&P 500 priced in Gold

    ^^ even with the non-constant dollar valuation because the dollar has just not dropped that much in 2 years -- i.e. 70%+
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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