By Ron Rosen

November 7 (King World News) - “The Terrifying Big Picture”

It’s easy to see that ever since the year 2000 gold bullion has been in a bull market and the S&P 500 has been in a megaphone pattern bear market.  Gold has dramatically increased in price while the S&P 500 has done nothing but go up and down.  The Fed’s QE’s, plus a twist, are placed on the chart of the S&P 500. They inform us of when the Fed believed it had to goose the economy and the markets in order to keep them from collapsing.  OK, but what’s next?  Will gold keep going up?  Will the S&P 500 head down again?

Well, we now have a pretty good idea that the Fed will continue doing QE’s as far into the future as they can see....

Continue reading the Ron Rosen piece below...


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That may or may not be very far.  The general expectation is that if the Fed continues to do QE’s, the Stock averages will continue to move up.  We know that gold is in a long-term bull market.  The S&P 500 and the DJIA, if left on their own, would normally begin a leg E collapse at this time (see right hand side of chart below).

If the Fed, through using QE’s and keeping interest rates low, can keep the stock averages going up they will be introducing us to a way of life that has not been seen in a major country since the Weimar Republic.  That would be stock averages up and gold up at the same time.  But based on the Weimar Republic’s market experience, gold would far outperform the stock averages.

Since President Nixon closed the gold window on August 15, 1971, the US dollar has been a pure fiat currency.  It is redeemable for fiat dollars and nothing else.  Since August 15, 1971 the USA has experienced either a bull market in gold, or a bull market in the S&P 500 and the DJIA.  However, there has not been a bull market in both the stock averages and gold at the same time.  The only evidence in the last 100 years of a bull market in gold and a bull market in stocks taking place at the same time was experienced during the time of the Weimar Republic.

The chart below (now-and-futures) shows us that during the Weimar Republic hyperinflation gold began to rise in 1915 and made a double-bottom in 1918.  Beginning in mid-1918, gold began a dramatic rise in price.


The second chart shows us that the stock market in the Weimar Republic did not begin its less dramatic rise until mid-1920, which was well after gold began its climb.  Obviously some knowledgeable German citizens, in the early 1900s, trusted their government’s so called money as much as some of us trust our current Federal Reserve Notes.  What an irony -- The world relies on the so-called US dollar, while the US simply lies about its value! 

Silver was also a big winner during the Weimar Republic hyperinflation.

There is no time left for for the Fed to decide.  They have reached the cross roads.  If they keep doing QE’s the stock averages should continue moving up.  If they stop doing QE’s the stock averages should collapse.

As far as action or inaction by the Federal Reserve, heads we win, tails we win.  This is the kind of investment I like.  It lets us lead the simple life!

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