Dollar Falls Sharply as Gold Approaches It’s All Time High… Again

Vampire: the Eternal Struggle
As my personal friends know, I’m a gamer geek. My collectible card game (CCG) of choice is Vampire: the Eternal Struggle (VTES). It’s Richard Garfield’s (the designer of Magic: the Gathering) second CCG and he designed it for multiple players. It’s a game I enjoy playing competitively.

Every year, White Wolf (the company that publishes VTES has a North American Championship. In order to play in this tournament, you first have to do well in a qualifier tournament which every region has. This weekend, Los Angeles had its qualifier tournament and I enjoyed playing in it (I didn’t qualify). Since VTES has a small but loyal player base compared to other CCGs, you get to know everyone pretty well who competes on a national level. We’ve become a pretty close knit group despite the fact that we all live in different regions; our willingness to travel and our love of the game brings us together.

Well known members of this tight-knit circle include Ben Peal, and a married couple, Robin and David Tatu. They have all purchased my book and found it a good read. Both of the Tatu’s were at the tournament this weekend, and I commented to them that my investments were up some 50% over the last six months. They recommended that I sell my gold investments before they crashed. Now, I found it a bit peculiar that two people who told me that they learned a great deal about how the economy works from the book that I wrote would then tell me to sell gold.

It does make sense in a human nature kind of way. The knee jerk response I’ve gotten when I tell people how much money I’ve made off of my gold investments is “Sell!” It’s a bit of conventional wisdom that has its roots in reality. After all, trees don’t grow to the sky and what goes up must come down. If something’s up 50%, then it must be time to sell it.

Well, yes and no. Continue reading Dollar Falls Sharply as Gold Approaches It’s All Time High… Again

Deflation? Only for the Stock Market

I have to take a moment to pat myself on the back.

Around the start of the new year, I said that deflation was not going to be the main concern, and instead, it would be inflation that was going to be making a comeback. As it turns out, the January numbers are in and CPI inflation is up, not down . ¬†Gold closed at $993 an ounce today and is poised to soon break into new all-time¬†highs. In this way, gold is serving its traditional purpose — as the canary in the coal mine warning all of us that things are not well and that danger, (in this case, inflation) is on the way.

Not everything is going up, however. Yesterday, the Dow Jones closed at a 6-year low. Today it went down even more — so now it’s flirting with its 10-year low. The Dow-Gold ratio, which I’ve talked about before, is rapidly reaching new lows. Dividing the Dow’s close of 7365 by gold’s close of $993 gives us a Dow-Gold ratio of 7.4, which is the lowest it’s been in roughly 20 years.

But it’s going to keep heading down even further than that. Soon, we should be seeing a Dow-Gold ratio of three or even two …

Imagine the Dow at 5000 and gold at $2500 an ounce and you get an idea of what the future holds. Continue reading Deflation? Only for the Stock Market