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Friday, October 23, 2009

Will the Dow/gold ratio reach 1/1?

The typical major bear market lasts 15-20 years. The last one began in 1966. It wasn’t until 1982 – 16 years later – that the next major bull trend began.

This bear market is already 10 years old. Perhaps it will end in 2015. Maybe in 2020. We don’t know when. We only know how it will end – in misery.

Now, despite 10 years of stinkin’ returns, investors still believe in stocks. They still hope to find the ‘next Google.’ They still punish fund managers who hold back. They still read the financial press. They still watch CNBC. They still want to know what stock to buy.

Yesterday, they bid up the Dow 131 points. The price of stocks to gold is about 10 to 1. When this trend began ten years ago, we predicted that the Dow and gold would go all the way to 1 for 1. We guessed it would happen at the 3,000 to 5,000 level. We’ll stick with that prediction until it proves correct…or it makes us look like a fool.
-- from "How Much Juice is Left in this Bear Market Rally?" by Bill Bonner

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