April 9, 2009
The Market Trend that Matters Most
If you watch CNBC or FOX Business, they show hundreds if not thousands of charts on a daily basis, enough to give you a headache and make you want to throw the remote control at the television. However, the mainstream media never shows the most important chart in the world, the chart that illustrates the market trend that matters most to us at the NIA.
We believe the most important chart in the world is the Dow/Gold ratio, which is nothing more than the value of the Dow divided by the price of Gold. The Dow/Gold ratio chart shows the cyclical nature of the battle between paper assets like stocks and hard assets like Gold.
To see the Dow/Gold ratio chart please visit our charts page: http://inflation.us/charts.html
The Dow/Gold ratio trends upward during secular bull markets in paper assets when everybody is fixated on growth. The Dow/Gold ratio trends downward when the growth phase ends, and everybody's concern is to conserve their wealth.
From the early 1930's to mid 1960's, we had a more than three decade secular bull market in paper assets where the Dow/Gold ratio rose from a low of 2 up to a high of 28. Afterwards, we had a 15 year secular bull market in hard assets, where the Dow/Gold ratio fell to a low in 1980 of 1. During the next 19 years, the Dow/Gold ratio rose all the way up to an all time high in 1999 of 44. Over the last 10 years, the Dow/Gold ratio declined to its current level of 8.9.
We believe there is a zero percent chance of the Dow/Gold ratio being anywhere near a bottom. When a stock market overshoots to the upside like it did in 1999 when the Dow/Gold ratio reached 44, the pendulum must swing back in the other direction and overcorrect to the downside.
If the mainstream media cared about their viewers as much as they do their advertisers, they would show the Dow/Gold ratio chart and explain to the public that they shouldn't even begin considering the possibility of investing into Dow stocks or even Real Estate until the Dow/Gold ratio is down to 1 once again.
We are ten years into a secular bear market for stocks and eight years into a secular bull market for Gold. We have not yet seen the mania phase for Gold. Americans were distracted by Real Estate for the past decade, and now with the housing market collapsing and trillions of dollars being printed by the Federal Reserve, all of the dollars being hoarded on the sidelines will soon need to find a new asset class to invest in and we believe it will be precious metals.
It is impossible to predict where exactly the price of Gold and the Dow will meet. We only know that they most certainly will meet and there is a very good chance of it happening within the next five years.
Gold's high of $850 per oz in 1980 adjusted for inflation would be about $2,300 per oz in today's dollars and back then our country was the world's largest creditor nation. Today, we are the world's largest debtor nation and there is no possible way our debts can be repaid without monetizing them and creating hyperinflation.
The way people became wealthy in 1980 was by investing into Gold stocks. Between December of 1978 and October of 1980, dozens of the prominent Gold stocks of that day increased in value by thousands of percent. We are doing our best to research and profile to you the Gold stocks that we believe could potentially become the biggest winners of the next five years.
Our next stock suggestion will be released on Tuesday and it is a company that has world-class mineral assets right outside of China and could be sitting on the largest untapped Gold and Copper resource in the world. An investment agreement between the company and the government of the country they are in is expected to be signed shortly. The company has a joint venture with the second largest mining company in the world which should allow them easy access to the capital needed to develop their project.
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