EC The Untold Story Of Nixon And The $35 Gold Peg

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The Dow Jones Index in its BEV (Bear's Eye View)  chart below is charging up the hill with eyes fixed on making new all-time highs. In the past week, it has advanced 2.9% BEV points, leaving only 3.52% BEV points to go before it once again makes stock market history. Another couple of weeks of this and the Dow Jones will once again be in record territory.

This is a very strong advance, but there’s something wrong with it. This advance comes after the -18.77% correction bottom on 24 December 2018, the deepest correction since the 09 March 2009 bear market bottom. Compare it to the other -7.5% corrections (declines below the Red Line) seen below. They too went on to new BEV Zeros, but unlike the current advance, they all saw significant corrections to the downside before doing so.

Oh sure, since late December there have been down days for the Dow Jones. But looking at the BEV chart below, it’s obvious the Dow Jones has advanced an uninterrupted 14.92% BEV points in the past two months, and that’s unusual. That is unless the current market advance is yet another instance of market manipulation by the “policy makers;” which I assume it is.

In the daily bar chart for the Dow Jones below, the Dow has finally broken above the declining trend line that goes back to October 3rd.

This chart illustrates how the current advance has seen no corrections since December 24th. Other than the -2.83% day of extreme volatility seen on January 3rd, the Dow Jones has for the most part only seen daily advances, with daily declines of the past two months of no importance.

This is strong market action, but how have the other major market indexes performed since the December 24th correction bottom? Let’s look at the table below.

The table is sorted by the green tab, which gives the advances since the market close on December 24th. The BEV data column is based on last all-time highs, which for most of the indexes are from early October 2018. But that is not true for the NYSE Financial index, whose last all-time high was on June 4th, 2007 (9,982.83).

The financial companies in the NASDAQ indexes are doing well. However, the companies in the NYSE Financial index (#16) have yet to fully recoup their losses from the Sub-Prime Mortgage debacle. Twelve years later and untold trillions of dollars the “policy makers” have “injected” into them, the NYSE Financial index is still -22.38% below its last all-time high June 2007.

These companies were the actual triggering device for the last bear market (October 2007 to March 2009). Looking at how they’ve performed since, like damaged goods, they may again trigger the next.

Here’s the Dow Jones with its 52Wk High & Low lines. Daily 52Wk highs at the NYSE have yet to break into triple digits since this advance in the stock market began. Looking at this chart for the Dow Jones and its 52Wk Lines you can see why. It takes time for the Dow Jones, or anything else to travel from one 52Wk extreme to the other.

In the weeks and months to come, I expect the NYSE will once again be producing +300 daily 52Wk Highs, as well as seeing the Dow Jones below pushing its green 52Wk High Line ever higher.

The US National Debt broke above $22 billion this week; not that anyone cares except worrywarts like me. But it wasn’t always that way.

In the chart below plotting the US National Debt since 1952, I’ve added the yields for the US Treasury long bond at certain points. The first was for December 1952, when the US National Debt was only $267 billion with the T-long bond yielding only 2.71%. In the following decades, the National Debt soared to $1 trillion dollars in September 1981, and the bond market freaked out! Bond buyers were wondering how the US Treasury could ever pay back a trillion dollars; not seeing a good answer to that question the US T-long bond yield spiked to 15.04%.

In the following decades, people have stopped asking such stupid questions. Really they did. Proof of that can be seen in July 2016 when US T-long bond yields collapsed to 2.11% as the National Debt approached $20 trillion. But that was three years ago, and since then T-bond yield have since increased as Congress continues spending borrowed money with total disregard to the nation’s solvency. US T-long bond yields have been at or slightly above 3% since February 2018. They won’t stay there forever.

The below 30-year bond was issued in February 2011 with a coupon of 4.75%. In July of 2016, its yield (Red Plot) bottomed at 1.94%. I expect that low yield will never be seen again in the US Treasury market for a similar maturity, and before this bond matures in February 2041 it will have yields deep into double digits.

The current mismatch between price and risk in the bond market is a perfect setup for gold and silver to go to levels few people would believe possible today. I expect before the coming bull market in gold and silver concludes, we’ll see gold trading for far above $30,000 dollars and silver well above $3000. How is that possible? The US dollar is the plaything of Washington and Wall Street. Before they are through having their way with it they will render it worthless. At that time only a fool would exchange an ounce of gold or silver for any amount of dollars.

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Harry Goldstein 1 year ago Member's comment

What a story, great article. Thanks.

Ayelet Wolf 1 year ago Member's comment

Fascinating story about #Nixon and #gold! But boy did it take a lot of reading to actually get to that story :)