Nasdaq - Financial Distortion at its Best - #ValueCycles #Gold
* Red line = Fed begins QE
This is both one of the most sobering charts that any Equities investor can see, as well as one of the most exciting chart for Precious Metals investors.
This is the Nasdaq/ Gold ratio (blue line, right scale) compared against the fiat NDX (orange line, left scale).
What is immediately apparent is the clear correlation of these two measures up to the tech wreck, up to this point the US enjoyed real growth driven from the productivity boom of the internet, after this bust the Fed was forced to tinker, fiddle and operate on the economy in an attempt to 'fix' the issues (i.e. the natural business cycle of boom and bust), this involved steep rate cuts and sustaining these low rates, this led to the 2008 housing collapse and GFC.
At this point the Fed further distorted the economy, in this case with radical QE and excessive money printing and bail outs, this evidently was the straw that broke the camel's back, and was enough to entirely de-couple these two charts.
After this point, it is no secret that the broader stock market has survived on buybacks, ultra low-rates, tax cuts and a host of other market interventions (the repo markets??????).
So what does this chart tell us?
1) The Nasdaq has made new fiat highs and has been on a tear since 2009 (breakout in the orange line), in Gold terms the bull market for stocks began in 2013 (the breakout on the blue line).
2) Gold has NOT confirmed the most recent stock highs, the high in the most recent stock run (measured in Gold) was in 2018 NOT in 2019.
3) BOTH charts are suggesting a top is very close, the fiat chart is in a rising wedge and the gold chart is making lower and lower highs.
This recent 10 year run in stocks has only just recovered around 38% of the prior move up against Gold, which interestingly enough is a key Fib level, suggesting that despite the stimulus, despite the QE and money printing and despite the wishes of central bankers around the world, they still couldn't fool the true numeraire.
This is both one of the most sobering charts that any Equities investor can see, as well as one of the most exciting chart for Precious Metals investors.
This is the Nasdaq/ Gold ratio (blue line, right scale) compared against the fiat NDX (orange line, left scale).
What is immediately apparent is the clear correlation of these two measures up to the tech wreck, up to this point the US enjoyed real growth driven from the productivity boom of the internet, after this bust the Fed was forced to tinker, fiddle and operate on the economy in an attempt to 'fix' the issues (i.e. the natural business cycle of boom and bust), this involved steep rate cuts and sustaining these low rates, this led to the 2008 housing collapse and GFC.
At this point the Fed further distorted the economy, in this case with radical QE and excessive money printing and bail outs, this evidently was the straw that broke the camel's back, and was enough to entirely de-couple these two charts.
After this point, it is no secret that the broader stock market has survived on buybacks, ultra low-rates, tax cuts and a host of other market interventions (the repo markets??????).
So what does this chart tell us?
1) The Nasdaq has made new fiat highs and has been on a tear since 2009 (breakout in the orange line), in Gold terms the bull market for stocks began in 2013 (the breakout on the blue line).
2) Gold has NOT confirmed the most recent stock highs, the high in the most recent stock run (measured in Gold) was in 2018 NOT in 2019.
3) BOTH charts are suggesting a top is very close, the fiat chart is in a rising wedge and the gold chart is making lower and lower highs.
This recent 10 year run in stocks has only just recovered around 38% of the prior move up against Gold, which interestingly enough is a key Fib level, suggesting that despite the stimulus, despite the QE and money printing and despite the wishes of central bankers around the world, they still couldn't fool the true numeraire.
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