Gold and Warnings From Exponential Markets

For the past 15 – 40 years, debt and most markets have moved upward in exponential trends.  Examine the following log-scale graphs.

Debt:  The US official national debt is shown on a log scale.  Debt goes up and up with no end in sight!

National Debt

S&P 500 Index:  Note the exponential trend line in blue, and the “danger zone” lines in red.  Given points 1 and 2, point 3 indicates that now is NOT the time for complacency.  Read: 15 Warning Signs of A Market Top.

C-SP

Crude Oil:  Conventional wisdom suggests that crude oil prices will remain low for a very long time – due to weak demand, strong supply, fracking, economic contraction, wind, solar etc.  Perhaps, but I’m not convinced.

C-Crude

Gold:  Gold made an intermediate bottom in July after the highly implausible Chinese government gold announcement and the HFT stop run.  The official Chinese announcement appears as plausible as the US unemployment rate – if we don’t count thousands of tons of gold and millions of unemployed workers, then the numbers will support the current propaganda agenda.

C-Gold

CONCLUSIONS:

 

For the past 20 years, and much longer in most cases, debt and prices have moved upward in exponential trends.

Markets go up and down.  Debt however, based on over 100 years of central bank and politician foolishness, only goes up – until a great deflationary crash that may not happen.  Expect debt to increase, politicians and central banks to spend and “print” and markets to boom and bust and follow exponential trends higher.

When markets get overextended in either direction, they reverse, or regress to the mean.  The 64 Trillion Dollar questions are which markets and when?  Look at the graphs again and ask yourself if you truly expect higher S&P prices along with lower gold prices, OR THE REVERSE.

Big Picture Perspective:

 

Yes or no?  Can we borrow our way out of debt and into prosperity?  Typical government and central bank actions indicate the usual answer is yes.  A more realistic understanding, which is coming, will boost gold prices.

Yes or no?  Are more government regulations, restrictions, and controls good for economic growth?  Typical government actions indicate the usual answer is yes.  But more regulations means less economic activity, less taxes collected, higher debt, more “money printing,” higher gold prices …

Yes or no?  Are policies that benefit banks and politicians generally beneficial to the middle class?  Typical actions indicate the usual answer is yes.  Buy gold, not the S&P.

Yes or no?  Is world peace good for the economies of the world?  One might think yes, but typical government actions indicate the usual answer is no.  More military expenses, more war, more debt, higher taxes, more “money printing,” higher gold prices… and repeat.

Question:  What will cause the next “Lehman Moment?”

 

For those who want a truly pessimistic assessment, read:

“The Great Financial Catastrophe”

 

Gary Christenson

The Deviant Investor

4 thoughts on “Gold and Warnings From Exponential Markets

  1. Agreed conventional war is financially beneficial. It is also demographically beneficial. It tends to balance to the male / female ratio. Too many males leads to a more militant society.


  2. Greetings Mr. Christenson, It’s August 27th, three days after the Wall (Fall) Street debacle. The paper tigers certainly dodged the bullet this week, but I fear Monday’s drama was just a preview of the main event to come. This leads me to believe that QE4 is no longer an “if” but “how soon” proposition. It is eminently evident that our beloved government will continue to address our economic woes with more of the same ineffective “fixes” expecting different results, which by definition is insanity. Silver was among many of the commodities taking a major hit due to the market correction. My physical silver holdings dropped in value by 14.83% with little recovery in price and premiums have risen to a level, prohibitive in my case of buying more silver. I blame our current White House and Congress for not protecting the American Dream. Any business run in the same fashion as our government would be bankrupt in weeks rather than years. The fact government prints all the money it needs to cover its’ failed economic policies and basic ineptitude is the only reason they prevail. We are in one of the most important election cycles in our lifetime. If the American people don’t go to the polls and reject the liberal/socialist agenda, many of the now middle class citizens will become denizens of soup kitchens and homeless shelters. This is not the time to be apathetic about the greatest gift our Republic gives us, the right to vote. In some of the races I am following there isn’t a candidate I would support. In these cases it boils down to voting against the least desirable politician. Obama promised us change and the only change that will be remember in a positive light will be his exit from the White House.


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