As a start, here is the evolution of Nasdaq compared to the Dow Jones Industrial
Then the ratio of the first one compared to the other
We are near the 2000 level
We can notice that the Nasdaq (growth values) is strongly influenced by interest rates.
Recently, rates have been rising, which seems to have a negative impact on the evolution of the Nasdaq
If you compare technos to mining, the graph cannot be ruled
Further, we can compare the evolution of “gold” mining stocks with their underlying.
As some like to say: “The Mining companies are in the cellar”!
With the risk of repeating it again and again (timing is the most difficult), I find hard to understand that you can buy a tech co with 50 years of profits (even if it shows growth) and sell what integrates value (for example, companies with a tangible assets worth 500 million quoting in the market barely 100 million or – another example – a company that has a p/e of 5 offering a dividend yield of 2.5%. Yes you can find them ! 10x cheaper than a tech at 50)
go figure !
Do not hesitate to contact me if you would like some gold stocks ideas and do not forget to read my disclaimer about investments
À plus de 4000 mètres d'altitude, dans les jungles reculées de la Nouvelle-Guinée se trouve le plus grand gisement d'or et de cuivre au monde. Arriver à ce gisement et construire une mine rentable a été l'un des plus grands défis d'ingénierie de tous les temps. En 1975, une société minière américaine a relevé le défi et, utilisant la technologie la plus sophistiquée disponible, a conquis la jungle et construit la mine de Grasberg !
50 years ago, on August 15, President Richard Nixon closed the “gold window”. It was a “temporary” measure according to what he said on TV this Sunday. With governments, temporary has a very different meaning…
Nixon was forced to do that: The US had printed too much dollars and had not enough gold to redeem all the foreign-held greenbacks.
Have a look at this hereafter chart and you’ll get it immediately.
We are in a pure fiat monetary system since then. Nothing backs the US dollar (or other currencies) except some “confidence”.
The US, supposedly, still have 8,135 tons of gold. The US government refused to audit the gold since 1953. Surprise, surprise…
Markets are near their historical tops and gold too.
But banks are still lagging and it has been lasting for years.
Could be a global solvency problem, Mr U. is telling me.
We will go through a depression (way too much debt, 331% of World GDP according to latest figures from the IIF). May be depression will be deflationary at first, and maybe/probably we’ll have hyperinflation later (currencies losing all of their value). The all system is at risk. Be very careful with your money.
Charts are monthly, last data July 24, 2020.
More recent data (a week old) of the Price to Book Value Ratio on a few banks:
From 1900 to the end of 2019, all currencies lost their value relative to gold.
The British Pound lost 99.63% and the US dollar 98.64%. Even worse, for the Japanese Yen and the French Franc.
The German currency lost its value completely twice and is about to go for a third time !
The German Mark called the Goldmark (backed by gold) was introduced in 1873. With the outbreak of World War I, the Mark was taken off the gold standard and became the Papiermark and briefly the Rentenmark in 1923.
The German currency lost all of its value.
From 1924, a new currency appeared, the Reichsmark. The German currency also lost all of its value and disappeared in 1945.
In 1948, a new currency appeared, the Deutsche Mark. In 1999, this currency became the Euro (at a rate of 1.95583 DM for one €). The German currency will probably lose all of its value for the third time. So far, it has lost 94.9% of its value relative to gold.
What about the Swiss Franc, the strongest currency in the world?
The mighty Swiss Franc has lost 92.69% of its value relative to gold during the period 1900-2019.
So, gold, the “barbarous relic” has proven to be really useful to keep the purchasing power over the years.
The US equity market plunged sharply thereafter (March), mining stocks too and gold briefly. Today, after the huge rebound in the American market from the lows, what is the situation?
The SP500 is at – 4.1% (after a collapse of -35%)
Mining stocks (GDX) are at + 14.2%
Gold is + 7.9%
Sometimes graphics speak more than words. Below find 3 graphics that are really scary for those who remain invested in the SP500.
The Put / Call ratio is at the lowest of the lowest
Many of the stocks in the SP500 have an RSI above 70 ( overbought level), the number of stocks above their 50-day moving averages is at its highest in 20 years and it is the biggest upward rally in the market. ‘history.
Small traders bought calls like never before (very bad sign for a continuation of the rise)
This last graph makes me think of the abbreviation FOMO (Fear of Missing Opportunity) which is the fact of buying at any price for fear of missing the increase.
In case of hyperinflation, which is a loss of confidence in the currency, nothing will protect your purchasing power better than precious metals.
Thanks to my friend H., we can just have a look at Venezuela. The country went from one Bolivar to another one : The Bolivar, to the Bolivar fuerte in 2008 (at the rate of 1 for 1,000) and to the Bolivar soberano in August 2018 (at the rate of 1 for 100,000).
The purchasing power of the currency is plunging, collapsing
Here is a long term chart (1914 – today)of the CRB Index (end of month) (LOG).
It represents a basket of 19 different commodities. Agricultural products and energy account for 80% of it and metals 20%.
We are approaching a major low so the end of the commodities bear market. Low prices are destroying supplies so when the current recession/depression will end, this index will start a new bull market. Time to put commodities producers on your radar so you know in advance what to buy when it will be time to do so.
Elliott Wave Analysis (made by one of my closest friend Mr H., thanks to him)