Thursday, October 29, 2009

Market Comment

Once again, gold is performing at least as well as the Standard and Poor's 500 index. It's rather incredible that 9+ years into that outperformance, not only has it been continuing almost daily, but that the ratio of the gold price vs the S&P index is about at a "normal" 1:1.

Given that the administration is simply supporting the FIRE economy with debt-based gimmicks such as "Clunkers" and nothing-down FHA loans, plus considering Carter-era gimmicks such as paying firms to create "jobs", this cycle is looking more as though there has been a 1974 major stock market bottom with a strong rebound, but with the likelihood of new lower stock market values adjusted for the general price level.

Except for the few income stocks that offer international diversification and adequate income and where management is outperforming the economy and its competition, such as McDonald's, it's getting harder to justify stock markets investments when you can invest in your home that you get to use, and alternatives to overvalued financial instruments that might pull an AIG over permanent assets such as gold or its riskier "precious" colleagues, platinum and silver.

Copyright (C) Long Lake LLC 2009

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