Dow Industrial Index Relative to Gold
By Barry Ritholtz - December 4th, 2009, 11:30AM
Here is a chart that is sure to drive my pal Paul a bit batty: The Dow in Gold.
While these sort of bananas priced in herrings occasionally can provide some insight, just as often as not they are confirming an existing bias.
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DID THE BULL RUN END IN AUGUST?
Source: David Rosenberg, Gluskin Sheff
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As much as I disagree with David Rosenberg’s market posture the past 2 quarters, I am cognizant that he raises a very valid point when he notes:
“The latest Investors Intelligence poll shows the bull camp at 50% and the bear camp at 16.7%. That bear-share is down to a six-year low. Note the current level on the VIX index, it is at 21.12 — complacency reigns.”
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December 4th, 2009 at 11:42 am
Is D Rosenberg that bad? Perma bear, but he seems to make sense.
December 4th, 2009 at 11:43 am
A free page on Robert Prechter’s web site shows that the last time Investors Intelligence measured so few bears was near the START of the 2003-2007 bull market. During that bull market, the percentage of bears often dipped to low levels, with no dire effect on the bull’s progress:
http://www.elliottwave.com/freeupdates/archives/2009/12/03/Market-Sentiment-Is-It-Really-at-Bullish-Extremes.aspx
December 4th, 2009 at 11:55 am
I agree with Rosenberg. A falling dollar can paper over lots of problems, just as a rising dollar exposes them.
December 4th, 2009 at 11:56 am
BR,
Can we get the same graph for housing prices in gold??
Thanks
December 4th, 2009 at 12:34 pm
This is the most bogus argument I have ever seen (now I see as to why Rosenberg was fired).
Common Barry, use some common sense instead of blindly repeating Rosenberg’s nonsense of measuring the stock market in relation to the latest bubble (aka gold). Any asset class measured “in terms of” any bubble (internet bubble, recent real estate bubble, recent oil bubble, and now gold bubble) will be underperforming.
As far as the sentiment measures, Rosenberg has misleadingly cherry picked selective surveys.
In fact, the latest survey conducted by Bloomberg showed that the hedge funds (aka “smart money”) have been moving into the stock market while retail (aka “dumb money) has been selling like there is no tomorrow.
What kind of “complacency” is it when the retail is not participating (usually retail is last to chase the stocks)?
Please read, Hedge Funds Buying as Individuals Sell in Bull Signal
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aJBx8htrQNTg
December 4th, 2009 at 12:35 pm
As far as VIX, one need to compare it to the long-term historical averages, not to the recent fear and hysteria driven anomaly.
December 4th, 2009 at 12:41 pm
Sings of complacency?
“Hedge funds are shoveling money into stocks as individuals exit at the fastest rate in a year”
“Investments designed to profit when stocks retreat increased. So-called bear-market and long-short mutual funds attracted a record $10 billion this year through October, more than double the previous high in 2006″
“hedge funds are buying stocks, but they’re also shorting stocks in record numbers and buying put options in record levels”
Give us a break Rosenberg!
Go back to Canada to hide under a slimy rock!
December 4th, 2009 at 12:53 pm
@Robespierre
Case Shiller Index / Gold back to 1987
http://www.chartmechanic.com/chart.jsp?c=demo/Housing%20Gold%20Ratio.chart
December 4th, 2009 at 1:11 pm
Hey, Barry. Love the blog, but will not return until the Mindless Troll known as Climategate is banished forever.
LB is enjoying the delicious taste of freshly roasted goldbug today…
Climategate, learn to use the english language and please desist from unpleasant criticisms of Mr Rosenberg.
Bye.
December 4th, 2009 at 1:17 pm
Wait until the VIX goes below 20 before calling complacent. The 15 – 20 area is usually the bottom for the VIX
@LB gotta love that volatility in the gold market huh? Gold is a volatility trader’s dream
December 4th, 2009 at 1:40 pm
@leftback,
I did not insult you personally for you not knowing the English language, nor did I call anyone as “the Mindless Troll”.
In addition, the purpose of this blog is not to maintain a group think mentality that you like.
Maybe if you ask Barry to add a comment editing plug-in to his blog, I will be more than happy to edit any typos and to add an “s” to “need” to make you happy.
December 4th, 2009 at 2:02 pm
AAII poll of individual investors shows nothing close to extremes in bullish or bearish sentiment. If anything, it reflects continuation of a bearish bias that has been in place for a couple years, and there is a relatively high percentage of respondents who are uncertain and unable to admit to either a bullish or bearish stance.
AAII is a noisy and unscientific poll, and trends in AAII sentiment over periods of weeks don’t seem to provide any useful insight regarding the market, but extremes in AAII numbers have been useful in the last couple years.
December 4th, 2009 at 2:53 pm
Gold sure looks healthy to me. Nah, no bubble there. [snark off]
December 4th, 2009 at 3:41 pm
In time, Rosie will be right in his bearishness…but when? Seneca Says also makes a very valid point. Do follow Rosenberg, but also Jeff Saut, Dan Sullivan and Barry’s Fusion IQ, and thus far doing well with the latter threes’ “counsel”!
December 4th, 2009 at 7:41 pm
So, the market is a significantly better value now than in March? wtf?
December 4th, 2009 at 11:06 pm
Hey LB don’t go. Your still needed here. I’m not sure if you are anti technical analysis or not but that massive inverted head and shoulders in gold sure seems to be fully engaged to the up side. I don’t think it’s worth while to ignore that kind of thing any more if you still do.