Let's check on the chaos in the market.
The chaos is proceeding splendidly. It will be some time before order can be restored.
First of all. I have to rescind my predictions of this post. As I stated in the post, it was early to make a prognostication, but the violence of the earlier move convinced me to make one anyway. That move has reversed sharply, blasting out of the deflationary channel in a disinflationary direction.
The graph of the gold-copper ratio shows the rapid deterioration of the real economy--by which I mean the part that buys copper and builds refrigerators. Typically the gold-copper ratio increases when the economy goes bad, which in our second graph would appear as a move to the right--something still underway.
In fact, the current situation is even worse than it appears, because in order to calculate the rate of change, I have to subtract the two calculated gold-copper ratios, and I avoid using trailing averages. So the above chart is one week behind reality, where the current ratio is closing in on 700. This is higher than any weekly closing GCR in the past ten years. Looking at monthly closing ratios, only twice since 1977 has the ratio been higher: in September 1980 (717); and in September 1986 (711).
What I think we may see going forward is more chaos. I think we are in a bear market, and the work of a bear market is to make the biggest downward move dragging the most money down with it. Money on the sidelines needs to be drawn in bit by bit until it is all destroyed.
In the long term, The World Complex is a fan of gold. It's always worth buying, but it's important to avoid leverage and keep cash available, because the cash calls always happen at the most inopportune moment.
The chaos is proceeding splendidly. It will be some time before order can be restored.
First of all. I have to rescind my predictions of this post. As I stated in the post, it was early to make a prognostication, but the violence of the earlier move convinced me to make one anyway. That move has reversed sharply, blasting out of the deflationary channel in a disinflationary direction.
The graph of the gold-copper ratio shows the rapid deterioration of the real economy--by which I mean the part that buys copper and builds refrigerators. Typically the gold-copper ratio increases when the economy goes bad, which in our second graph would appear as a move to the right--something still underway.
In fact, the current situation is even worse than it appears, because in order to calculate the rate of change, I have to subtract the two calculated gold-copper ratios, and I avoid using trailing averages. So the above chart is one week behind reality, where the current ratio is closing in on 700. This is higher than any weekly closing GCR in the past ten years. Looking at monthly closing ratios, only twice since 1977 has the ratio been higher: in September 1980 (717); and in September 1986 (711).
What I think we may see going forward is more chaos. I think we are in a bear market, and the work of a bear market is to make the biggest downward move dragging the most money down with it. Money on the sidelines needs to be drawn in bit by bit until it is all destroyed.
In the long term, The World Complex is a fan of gold. It's always worth buying, but it's important to avoid leverage and keep cash available, because the cash calls always happen at the most inopportune moment.
No comments:
Post a Comment