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Sunday, October 3, 2010

This Week in Charts

This week in charts, I pulled the graphs way back, some as far back as 1995.
It helps to put context where we are, by where we have been.

First up is the S&P 500, SPX, notice market rallied significantly into 2000, but since then it has whipsawed around. We are not better off today than 10 years ago in terms of US dollars. And we are worse off if we adjust for US Dollar depreciation and "lost" revenue if investments was in US bonds.

Next up is US interest rates for 30 year, 10 year, and 5 year bonds. All have been on a significant decline for the last 15 years, and shows no signs of rallying. From this view, my friend John's logic of buy bonds now is sound. Rates today may be lower tomorrow, so lock in higher rates today. We may see US rates hit near zero someday, but I doubt it. There will be an inflection point, and that should be before rates hit zero.

Now lets take a look at the value of the USD as a currency, and value of gold in terms of USD. Notice gold is rising much faster than USD is falling. Why? I believe it is one of my principal reasons for buying precious metals. India and China are rising wealth nations, and those cultures prize gold in their societies. In a nut shell, Americans will find gold more expensive as they compete with an emerging market of 2.5 billion people in those countries. That is in addition to fiat currency confidence problems.

So where does that leave us in the near term? Steady as she goes for now, natural resources as investments.

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