Posts filed under “Markets”
S&P 500/Gold ratio
click for larger graph
Source: Chart of the Day
The chart above was created by dividing the S&P 500 by the price of one ounce of gold. This results in what is referred to as the S&P 500/gold ratio or the cost of the S&P 500 in ounces of gold.
Chart of the Day notes "it takes 2.45 ounces of gold to “buy the S&P 500.” This is considerably less that the 5.53 ounces back in the year 2000. When priced in gold, the 2002 to 2005 stock market rally didn’t amount to much. In fact, the short-term trend is down and nearing the 2003 lows."
UPDATE January 9, 2005 12:21pm
A commentor references these charts below as showing very similar the long term ratio cycles to our 100 year Bull/Bear Cycles: (Click for larger graphics)
Source: The Golden Constant Steve Saville, 26 Jul, 2005
As Saville makes clear, "an ounce of gold today is the same as it was 5000 years ago and the same as it will be in 5000 years time;" However, Corporate earnings, paper money, treasuries are all subject to a variety of other factors. Hence, the relative importance data priced relative to a nonfluctuating basis, such as gold. (One caveat: total mined tonnage of gold continues to rise, so supply is an issue).
Quote of the Day
"America’s once mighty job machine is struggling as never before. The combination of subpar job creation and real wage stagnation puts extraordinary pressure on the income-generating capacity of the world’s most aggressive consumer.
Of course, you’d never know that from the spin that followed the release of the latest monthly labor market surveys of the US Bureau of Labor Statistics. From Washington to Wall Street, the verdict was nearly unanimous — all is fine on the US labor market front
Nothing could be further from the truth."
-The End of Labor
Stephen Roach, Morgan Stanley
Its not just the NYT that has a great graphics department — the WSJ has put out their fair share of terrific charts (as this blog has long since demonstrated).
Here’s the WSJ Market Scorecard for 2005:
"U.S. stocks took a backseat in 2005. Big gains in oil and gold drove commodities prices to a second-straight banner year, while the Fed’s faithful campaign to raise interest rates made bond yields the talk of Wall Street. Here is a scorecard for major financial-market indicators:"
The graphs are actually too wide for my layout, so they require a 2nd click . . .
As promised, today brings us to the 4th in our series of charts: P/E vs S&P500 click for larger chart courtesy of Mike Panzner, Rabo Securities > I’ll get into the significance of what this means to the markets later, but for now, note where the P/E is over the median, and its impact on…Read More