Where Are We ?
1a DOW GOLD Ratio
I'm not a gold nut. The reason this chart is on the list is because we need to measure with something that is constant. An ounce of gold does not change in Real Value, simply said an ounce of gold a thousand years ago and an ounce of gold today is still an ounce of gold, the same value it was than. Gold has NEVER gone to zero, it is aways worth something.
To begin to understand WHERE ARE WE, we must use a standard measurement that stays the same value and paper currencies never stay the same value, they change daily.
We can measure using paper currencies but must pay attention to the value that paper currencies are worth against each other. So since gold NEVER changes in Real Value it is an excellent way to measure Real Value.
In the early 1980s the US dollar was stronger then it is today. Same paper money but weaker today. 2 ounces of gold in the early 1980s got you one DJIA and at the dot-com/tech peak early 2000s you needed 42 ounces of gold to get the same amount of DJIA. So let's watch this chart and see what the long trend does over time.
1b Dow 30
Since the 2000 blow off in the markets I have looked at all markets and have compared them in relationship to currencies and gold to try and gauge WHERE ARE WE in Real Value.
Jan 31 2000 to Sep 30 2014 in Real Value once currencies factor in. So after 14 years 9 month (ROC set to 177 months on some charts to show the long NOMINAL change) here are the REAL returns.
Natural Gas 27%
S&P 500 16%
S&P 400 160%
S&P 600 171%
Russel 2000 82%
Wilshire 5000 28%
More infomation on the month end report, post on OneDrive.
By no means am I insinuating that we will be using gold as money. The World will continue as usual using some form of paper notes for goods and services. Question is what value the markets ties too those paper notes.
Something real for something real, your time spent earning income is real and you get paid in paper notes, you don't get Real Value back for your time until you trade those paper notes for goods and services. We use paper notes for goods and services because it only makes practical sense.
My point is this; understand Where Are We in Real Value because the paper notes we use change in value daily. The goods and services remain the same and NEVER change in value. Paper notes have no Real Value but can be traded for Real Value goods and services.
Pick any goods and services that you consume and track your buying power, some go down, some go up, some remain the same. Keep in mind goods and services are Real and have Real Valve. DON'T LET THE NOMINAL PRICES FOOL YOU, it is possible to pay more or less nominal paper notes for some goods and services but it ends up costing you more or less in Real terms.
Also think what all of this really means on a global scale, all transactions in the end require Real Value for Real Value, Real goods and services for Real goods and services, so if all or some of those paper notes get too skewed, interesting things can happen very fast, good or bad, sometimes ugly.
No one knows the future, the best we can do is watch what is happening, the charts don't lie and just show us the facts, Where We Are and have been, use them to measure risk.
See PDF - Real Value vs. Paper Value - posted on My SkyDrive
1e U.S. 30 Year Treasury Bond Price
This chart is important because it is tied to the value of the US dollar.This chart shows the long trend of interest rates paid on the US long bonds. So since the early 1980s interest rate paid out on these paper notes has been trending down to 2004,in the early 1980s 20% to 1% in 2004.
On Jan 3, 2001, the Fed embarked on its rate cutting campaign, slicing rates by 50 basis points in response to a sharp slow down in retail sales and business spending.In all, the Fed reduced interest rates 13 times between January 2001 and June 2003 when it made its last rate cut that brought the funds rate down to one per cent - the lowest level since 1958, Elvis was King, Eisenhower was President, and most viewing this chart where too young to remember or weren't born.
Oct 29 2008, back to 1%
Dec 16 2008, 0.25%
Sep 30 2014 Major Bank Rates (rates posted each month end) link below if you require up to date rates and/or other Bank Rates.
0.25% Federal Reserve
1.00% Bank of Canada
0.15% European Central
0.50% Bank of England
0.00% Swiss National Bank
0.10% Bank of Japan
2.50% Bank of Australia
1g US Dollar vs. Other Currencies
Paper currencies are just paper. Does it cost more to print a $1 bill or $100 bill? Paper currencies are not real money, they are paper notes (Funny Money) that are traded in good faith for goods & sevices.So as long as all have faith in paper notes all is well.So keep track of your buying power of goods & services over time and see if you need MORE or LESS paper notes to do the same things that you have done in the past.
*** The gold currencies ratios on page 3 show what is happening ***
So even if you never buy gold or use gold as a currency, you do consume foods, energy, goods and services, watch if they cost MORE or LESS gold to do the same things that you have done in the past.
Gold is real money because it has Real Value. FACT, gold has NEVER gone to zero and has NEVER been de-valued like paper currencies.
Yes gold does move up and down against all paper currencies, but an ounce of gold does NOT change, it is still an ounce of gold.Paper currencies change in value daily, sometimes paper currencies even go to ZERO or lose a lot of buying power, sometimes very fast. So watch the charts for WHERE ARE WE and watch the trends.
Gold has a limited supply above ground, a limited supply of how much more can be mined and how fast it can be mined as well the cost of mining, unlike paper currencies all one must do is print more paper notes and or issue more bonds (IOUs).
1h NYSE Composite
1i S & P 500 Large Cap
1j Nasdaq Composite