Best of the Week
Most Popular
1. Best Cash ISA Savings Account for Soaring UK Inflation - February 2018 - Nadeem_Walayat
2.Gold Price Forecast 2018 - February Update - Nadeem_Walayat
3.Bitcoin Crypto Currencies Crash 2018, Are We Near the Bottom? - Nadeem_Walayat
4.Trump Bubble Bursts, Stock Market Panic Dow 1175 Point Crash Analysis - Nadeem_Walayat
5.Gold Corrects, Bitcoin Markets Crash, Whilst Stocks Plunge - Nadeem_Walayat
6.US Treasury Bonds: Fuse to Light the Bonfire - Jim_Willie_CB
7.Dow Falls 666 Points As Cryptocurrencies Crash And Krugman Emerges From His Van - Jeff_Berwick
8.Stock Market Roller Coaster Crash Ride Down to Dow Forecast 23,000 - Nadeem_Walayat
9.Trading the Shadows - Oil, Dollar, Stocks, Gold Trend Analysis - B.R. Hollister
10.Stock Market Analysis: Baying for Blood - Abalgorithm
Last 7 days
Why You Should NOT Sub4Sub Free Youtube Subscribers - YTpals, Subpals, SubmeNow Test Results - 23rd Feb 18
One Belt, One Road, One Direction for Precious Metals - 23rd Feb 18
Gold’s Curious Sentiment - 23rd Feb 18
Relationship Between Crude Oil and U.S. Dollar in February 2018 - 23rd Feb 18
Why The Next Oil Boom Will Be Fueled By Blockchain - 23rd Feb 18
Gold Bull and Bear Markets - 23rd Feb 18
Why Recent Lows Are Crucial for US Dollar - 23rd Feb 18
Will Bitcoin be Larger Than NEO in 2018? - 23rd Feb 18
Stock Market SPX Probable Pop-n-drop - 22nd Feb 18
Stocks Fail to Hold Gains, But Still No Correction - 22nd Feb 18
Why We Should Buy Essay - 22nd Feb 18
The Latest US Debt Blow - 22nd Feb 18
6 Tips For Seamless Business Foreign Exchange - 22nd Feb 18
How to Anticipate Stock Market Trend Changes - 21st Feb 18
Gold Miners’ Rally? What Rally? Watch Out for More Fake Moves! - 21st Feb 18
5 Big Drivers of Higher Inflation Rates Ahead - 21st Feb 18
Goofy Indictments Divert Attention from Criminal Abuses at the FBI and DOJ - 21st Feb 18
Bitcoin or British Pound ‘Pretty Much Failed’ As Currency? - 21st Feb 18
Stock Market Waiting for the Fed - 21st Feb 18
National Identity Demands Restrictive Immigration - 21st Feb 18
Best Opportunities for Freelance Technical Writing Jobs - 21st Feb 18
4% US 10-year Treasury Note Yield Will Be a Floor Not a Ceiling - 20th Feb 18
Governments Are LYING about Their Gold Activities while Mining Companies Cower - 20th Feb 18
No Silver Lining Here - 20th Feb 18
Semi Conductor Stocks SEMI Bearish? - 20th Feb 18
The Prisoner Promised Land - 20th Feb 18
Best Car Dash Cam Review: Z-Edge S3 Dual Dash Cam - UNBOXING (1) - 20th Feb 18
How Inflation Reduces The Real Value Of Social Security Net Of Medicare Premiums - 19th Feb 18
Could Stellar Lumens be a Challenger to Bitcoin for International Payments? - 19th Feb 18
US-China Trade War Escalates As Further Measures Are Taken - 19th Feb 18
How To Trade Gold Stocks with Momentum - 19th Feb 18
Is a New Gold Bull Market on the Horizon? - 19th Feb 18
Stock Market Decision Point! - 19th Feb 18
An Inflation Indicator to Watch, Part 1 - 18th Feb 18
Get on Top Of Debt Before It Gets on Top of You - 18th Feb 18
Will the Stock Market Make a Double Bottom? - 18th Feb 18
5 Reasons Why Commodities Are the Investment Place to be in 2018 - 18th Feb 18
1 Week Later, Stock, Bond Market Risk Remains ‘On’ as 2 of 3 Amigos Ride On - 17th Feb 18
Crude Oil Prices: A Case of Dueling Narratives? - 17th Feb 18
Free 1000 Youtube Subscribers Services - YTpals, Subpals, SubmeNow Test - 17th Feb 18
How to Trade as We Near March Stock Market Top - 16th Feb 18
Bitcoin as Poison - 16th Feb 18
GDX Gold ETF Weathers Stock Market Selloff - 16th Feb 18
Casino Statistics and Demographics - 16th Feb 18
IS Today Thee Stock Market Turn Day? - 16th Feb 18
Huge SMIGGLE Shopping HAUL, Pencil Cases, Drinks Bottles, Back Packs, Toys.... - 16th Feb 18
Tesla Cash Keeps Burning at $320 a Share - 15th Feb 18
Big Conflict Ahead in the Financial Markets - 15th Feb 18
Stocks Extend Rally Off Friday's Low, But Short-Term Exhaustion Near - 15th Feb 18
Stock Market Out on a Limb... - 15th Feb 18
Things Only a True Friend Would Say About Gold - 14th Feb 18
Global Debt Crisis II Cometh - 14th Feb 18
Understanding Crude Oil Behavior - 14th Feb 18
Stock Market is Getting Scary... - 14th Feb 18

Market Oracle FREE Newsletter

Urgent Stock Market Message

Stock Market Highs Make Strong Case for Precious Metal Buys

Stock-Markets / Stock Market 2017 Feb 01, 2017 - 12:47 PM GMT

By: MoneyMetals

Stock-Markets

Dow 20,000 was ushered in with great fanfare. Traders on the New York Stock Exchange sported "Dow 20,000" hats. Even President Donald Trump joined the celebration.

Trump told ABC News he was "very honored" that the stock market gave his presidency a symbolic vote of confidence. "Now we have to go up, up, up. We don't want it to stay there," he said.


Everyone loves a bull market. Expecting stocks to go up forever, however, is a dangerous mindset to have as an investor. Recent history suggests that major milestones for the Dow should be viewed less as cause for celebration and more as warning signs.

What 1999 Can Teach Us About 2017

A case in point: Dow 10,000. On March 29, 1999, the Dow Jones Industrials closed above 10,000 for the first time ever.

Dow 36,000

The financial media, of course, cheered the milestone, feeding the public Wall Street propaganda rather than healthy skepticism.

Sure, the perma-bulls will always concede, there might be a pullback at some point. But books like Dow 36,000, released in 1999, bolstered the conventional wisdom that stocks were destined march higher over the next decade.

In fact, stocks went nowhere for 11 long years. The Dow suffered two crashes - one in 2002 and a bigger one in 2008.

In mid 2010, the blue chip average was right back where it was on March 29, 1999. The Dow crossed back above 10,000, as it had dozens of times before, to little fanfare.

It turned out to be the 10,000 cross that mattered. Finally, more than 11 years after the Dow first hit 10,000, stocks were in a new bull market. The Dow was on its way to 20,000.

Anyone thinking of buying stocks at today's lofty valuations would be well advised to take heed of what happened to investors who bought at Dow 10,000 in 1999 and held on through today.

Yes, they did double their money (before dividends) in nominal terms.

But in real terms, the Dow hasn't made any progress.

Investors would have been better off selling stocks when the Dow hit 10,000 and using the proceeds to purchase gold bullion.

Back in March 1999, silver sold for $5.20/oz and gold prices traded at a mere $285/oz. Gold values got as high as $1,900/oz in mid 2011 and today come in at $1,200/oz - still more than four times their 1999 levels.

That puts the Dow's nominal rise from 10,000 to 20,000 in perspective. The index has merely flat-lined, at best, in real terms since 1999. Going forward, it may not even manage to do that.

Trump Knows He Inherited a Bubble

The price/earnings ratio on the Dow is now arguably in bubble territory. Valuations have been artificially inflated in no small part by the Federal Reserve. Last September, candidate Donald Trump called the Fed-fueled market "a big, fat, ugly bubble."

President Donald Trump no longer sees it that way. Dow 36,000 here we come!

It will come eventually - even if only because of currency debasement. That doesn't necessarily mean the next 5,000 point move in the Dow will be to the upside.

History suggests that investors will have better odds of making real gains in stocks by waiting to buy at lower valuations. A bear market in equities could commence at any time, and a final bottom could be years away. In the meantime, stocking up on alternative assets including precious metals will give you other opportunities to make real gains regardless of where the Dow heads over the next few years.

Will Trumpflation Be to Metals What Stagflation Was in the 1970s?

Gold and silver markets have posted some of their biggest up moves when the stock market has been down or flat. The stagflationary late 1970s weren't kind to stocks, but they gave rise to a spectacular bull market in precious metals. It culminated in January 1980 with the price of an ounce of gold briefly equaling the quote on the Dow Jones Industrials.

From 1980 - 2000, Dow to gold ratio moved from as low as 1:1 to as high as 43:1. From 2000 - 2011, it fell to as low 6:1. The Dow to gold ratio now stands at around 17:1. Should it ultimately revisit the 1:1 ratio, we'd be looking at a massive stock market crash, an explosive move higher in precious metals prices, or some combination of both.

Dow:Gold Ratio 1980-2017

Could gold prices one day meet the Dow at 20,000 or some other number? A return to the 1:1 ratio is an extreme scenario, to be sure. But it's not far-fetched at all to suppose that history might repeat itself.

Even if Dow to gold only got back to a 4:1 ratio, moving out of stocks and into precious metals at current levels would be the trade of a lifetime. It would imply a potential $5,000 gold price to a 20,000 Dow - a 317% return on gold versus a 0% return on stocks in this hypothetical scenario.

In any major bull market for precious metals, the more volatile metal - silver - can be expected to post the bigger returns. Silver, being both a precious metal and an industrial metal, may also be well suited to benefit from Donald Trump's pro-industrial policies. Silver is essential in many areas of manufacturing, especially electronic and high-tech products.

Silver is also one of the world's most enduring forms of money. Along with gold, silver stands as a "hard" alternative to depreciating fiat currencies and bubbly financial assets.

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2016 Stefan Gleason - 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.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules