Gold, Silver & Expensive Stocks

2022년 10월 12일

This is a monthly chart of the DJI / Gold, going back as far as possible. It shows how many ounces of gold it takes to buy 1 "share" of the Dow Jones Index. I chose Gold instead of Silver because it's easier to conceptualize since the numbers are smaller.

For indicators, I've included the following:
- Shiller P/E
- US Interest Rates - data going back to 1980
- Gold/Silver ratio

The yellow declining lines on the graph indicate preiods where the stock market dropped in comparison to Gold (it takes fewer ounces of gold to buy 1 "share" of the DJI). In these times, you'd have hopefully sold stocks at the peak of the yellow line and exchanged all stocks for gold. When the yellow line bottomed on the chart, you'd ideally sell your gold for stocks. The "reasons" underlying these moments in time are in the indicators below - tied to either high Shiller P/E (1929, 2000) or rising interest rates (1980).

The purpose of this chart is to show a few things:
- Stocks have been expensive for a while due to easy monetary policy with QE (Shiller P/E bottomed in the 2008 crash). And we're still historically high (even despite coming down from the 2021 craze).
- Silver is cheap relative to Gold (Gold / Silver ratio of 90:1) and Gold is "historically" cheap relative to the DJI, making silver one of my favorite investments right now.

Thesis: While this is by no means is a prediction, I anticipate rates will stay elevated but not higher than 5% in the next several years. I think we'll see some more rotation out of stocks with unwinding of easy monetary policy. Inflation is still high and we could see stagflation come in. Ultimately, it's possible this is the start of another Gold/Silver supercycle (similar to 2000-2011). In short, no assets look truly attractive and we could be looking at a sidways market over the next 5 years. Personally, I like Gold and Silver over the alternatives for now.

One thing is for sure, get your popcorn ready.

Good luck everyone.

- C

GOLD SILVER GOLDSILVER DJI SPY

This is not financial advice.