SGM Metals: DOW/GOLD Ratio Will Overshoot 1/1 Before it Settles on Par!

June 7, 2012 - PRLog -- By Egon von Greyerz, Founder of Matterhorn Asset Management AG May 31 (King World News) –[ Stock market investors have since 1999 been under the illusion that their stock portfolio has maintained its value or even gone up slightly. Since September 1999 the Dow is up around 7%. So investors are lulled into a false sense of security that although they haven’t achieved the profits they made in the 1990s, their stock portfolio has maintained its value.

Very few investors actually understand that they have lost over 80% of their money in real terms in the last 13 years. As the graph above shows, the Dow is down 82% against gold since 1999. So the illusory gain of 7% actually translates to a total destruction of capital in real terms.

To keep the crumbling US economy afloat, the US government has flooded the country with worthless pieces of paper that they call money. In 1999 the US Federal debt was $ 5 trillion and today it is over $15 trillion. So in order to buy votes and keep investors happy, $10 trillion has been printed. Non-government US debt went up by another $30 trillion during the same period, creating a total of $40 trillion of liquidity.....

Of course, this addition of paper money does nothing for real growth or real GDP, but it gives perceived wealth to the people.  The long term effect of this deluge of fiat money is not to make individuals richer but to lumber them with debt that they can never repay.  Thus more money has to be printed to service and refinance old debt and to finance the ever growing deficits.

And the problem is worldwide with the European economies also running major deficits plus a banking system which approaches collapse.  Therefore there is likely to be a concerted money printing action by the Fed, the ECB, the IMF and other central banks which will be of gigantic proportions.  And the inevitable consequence of this will be a hyperinflationary depression.

Governments do not like gold going up since this reflects their deceitful actions in destroying the value of paper money.  In spite of this gold has gone up over 6 times since 1999. So whilst the stock market has been artificially supported due to massive money printing, in real terms i.e. in gold, stocks have been a very poor investment with a more than 80% fall.

Stock market investors continue to hold on to their stocks in the hope that we will again see bull markets like in the 1980s and 1990s. But looking at the very long term Dow/Gold ratio chart this optimism seems unfounded.  The chart shows a major “megaphone” pattern that has a target of 1.  This would mean that gold and the Dow would be equal in value.  It would also mean another 90% fall of the Dow against gold.  In my view the pattern will probably overshoot and we will go well below a one to one ratio.

Even if we “only” go to a Dow/Gold one for one ratio, at what level would that be? For many years I have forecast gold at $10,000 dollars, and that would mean the Dow would be at the same level.  But remember this means that gold would go up 6 times from here and the Dow would be down 16%. With hyperinflation gold could go considerably higher. So investors who want to preserve their wealth in the next few years are likely to do much better by owning physical gold than stocks.]

Let that simmer for a moment, the DOW will eventually be at par with Gold! Meaning one share of the DOW will be equal to the price of an ounce of Gold! So for example, lets say the DOW loses half of its value from 13,000 that would mean that the DOW would be at 6,500 and the price of gold would also be at $6,500 per ounce! It could also mean that the DOW ends up around 3,000 pts. and therefor gold would be at $3,000 per ounce! Either way the price of gold is going up considerably and the DOW will suffer a blood bath of epic proportions.

The only question is what side of this event will you be on? Will you be one of the mindless sheep crying themselves to sleep watching ‘the market experts’ try to explain why the worlds wealth disappeared when the stock market collapsed as a result of the globe turning its back on the dollar? Or will you be one of the few sensible people who saw the dangers of a global fiat money system that had been leveraged 50 times over, creating a $2 QUADRILLION debt derivatives bubble that was unsustainable and threatened to take down the global banking system which motivated you to simply get out of the common denominator of paper monopoly money and into gold & silver bullion? Which one will you be?

Unfortunately the answer is not predicated by common sense, for if it were you would already have moved out of harms way. But I’m willing to bet you still believe that “your 401K is coming back” or at least that’s what you tell yourself because your attempt to get your retirement monies out of that losing venture was met with resistance and threats of losing 1/2 in fees & taxes just to get your hands on your money, so you didn’t actually move anything. The truth is that your ability to identify the threat and move out of harms way is determined by your ability to overcome the stockholm syndrome. We all have been conditioned to suffer from this condition thanks to the media and the “investertainment” genre of TV that has been created in this reality TV craze.

STOCKHOLM SYNDROME: In psychology, Stockholm syndrome is a psychological phenomenon in which hostages express empathy and have positive feelings towards their captors, sometimes to the point of defending them. These feelings are generally considered irrational in light of the danger or risk endured by the victims, who essentially mistake a lack of abuse from their captors for an act of kindness.[1][2] The FBI’s Hostage Barricade Database System shows that roughly 27% of victims show evidence of Stockholm Syndrome.[3] courtesy of wikipedia.org

We all are being held hostage by Wall Street hoping that the impossible can all of the sudden become possible. IT CAN’T & IT WON’T! Wake up to this truth today and make your move now before its too late. Establish your “Plan B” in physical gold & silver bullion today and begin to participate in the sound money debate before the world is forced to only accept sound money! Tick, tock.