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Buy Gold, Sell the S&P

Stock-Markets / Financial Markets 2015 Sep 10, 2015 - 03:33 PM GMT

By: DeviantInvestor

Stock-Markets

Buy low, sell high!  As of today, September 3, 2015, the better choices are buying gold and selling the S&P 500 Index and relevant stocks.

Why?

Examine the graph of the ratio of Gold to S&P 500 Index for the past 25 years.  The ratio is low now and likely will correct higher.  I think gold will move higher and the S&P will move lower.


Examine the graph of the S&P – 20 years on a log scale.  The Index has broken the red support line dating back to 2009.  This is a “danger zone.”  In addition, internals are weak, moving averages have turned lower and crossed each other, and some global stock markets have already crashed.  I think it is likely the S&P moves much lower in the next six months.

Examine the graph of Gold – 20 years on a log scale.  The three trend lines, as I have drawn them, show that gold is at the low end of the range and over a third lower than the center line which indicates the average of the long term exponential trend upward.  I think gold will climb much higher in the next several years, and that the gold low in July will hold.

Could the S&P burst higher and gold be crushed again?  Certainly!  “Print” a few trillion dollars of digital “money” and buy S&P futures while selling short gold contracts and the S&P will levitate while paper gold prices drop.  But is that likely?

My estimation is that various forces will nudge the S&P higher and occasionally levitate it, but deflationary forces will overwhelm both markets and central banks, and global stock markets will continue their downward path.  Eventually people and investors will realize that “money” is now debt owed by a government, central bank or corporation that may not be solvent.  When confidence in the viability of debt based fiat currencies and confidence in the ability to repay debt diminishes, people will flock to gold investments.

My estimation:  S&P down for months, maybe several years, and gold up for years!  If not, then these (no longer relevant) ideas may still be true:

  1. Buy stocks for the long term. They always go up.
  2. Buy real estate – house prices always go up.
  3. Gold is useless and a relic of the past.
  4. Don’t fight the Fed.
  5. Trust Wall Street brokers as they have your best interests at heart.
  6. Politicians will take care of the middle class.
  7. Hope and change.

These are my opinions.  Do you own analysis and make your own choices.

Test:

  1. How much gold should you own knowing that the Federal Reserve is in charge of the money supply?
  2. How much gold should you own knowing that gold protects purchasing power and central banks want to devalue their currencies?
  3. How much gold should you own knowing that consumer prices rise during times of war?

Read:  Why the Next Crisis Will Be Far Worse than 2008

GE Christenson aka Deviant Investor If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail

© 2015 Copyright Deviant Investor - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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