Passing the Gold Bar
By Bill Bonner
09/13/11 Baltimore, Maryland – First, a look at the markets. They’re becoming exciting. Yesterday, for example, stocks reversed some of the losses from Friday. The Dow ended up 68 points, keeping the index above 11,000.
Going the other way, gold lost $49.
What to make of it?
In our guess…both stocks and gold SHOULD be going down. That doesn’t mean they will go down, of course. But at least it gives us a point of reference.
They should go down because there’s a Great Correction going on. There’s no secret to it. Sometimes stocks are expensive and sometimes they’re cheap. When an economy is expanding, it makes sense for stocks to be expensive…companies’ sales are going up…profits should increase too. But when an economy is contracting…or, more precisely, when credit is contracting…stocks should be priced for shrinking sales, followed by shrinking profits. That is, they should be cheap, not expensive. Stocks are now priced for an expansion, not a correction. They should go down.
Investors are figuring that out…little by little. As they do, stocks go down. Simple as pie.
But gold is a little trickier. By our reckoning, gold is a little expensive. It buys more stuff than usual.
Of course, it should be a little expensive. Looking ahead, the whole world’s banking, credit, and monetary systems are wobbling. Gold is the only money you can trust. So smart investors, smart CEOs, smart family men, and smart central bank chiefs are all thinking the same thing – that they should lay in a supply of gold as a reserve against catastrophe. So they’re buying.
But in a…Read more…
Read more: Economic News and Ideas on Debt, the Market, Gold, Oil, and Investing. http://dailyreckoning.com/#ixzz1XvMNu8PH
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