S&P 500 Priced in Gold---The Economic Recovery Illusion

Back in Jan of 2011 Black Swan Insights predicted that the S&P 500 when priced in gold would decline. So far in 2011 this has been the case. The following chart shows just how poorly the S&P 500 has performed this year when priced in real money. The result is shocking. We are now back to the March 2009 lows--and no fiat money printing from Zimbabwe Ben will change this situation.

click chart for larger image

With the ECB officially entering the monetization phase, you can expect gold to continue its upward trajectory.

This issue of money printing and the performance of equity markets is very important. The SP 500 may only be down 4.4% year to date in nominal terms, but in real (gold) terms it has fallen almost 20%. And when you consider the performance of the S&P 500 since March 2009 you can see that it does not exist in real terms. This whole fiat money rally from 2009-2011 has been an illusion to fool the masses into thinking they were wealthier, when in reality they are no better off then at the bottom of the Great Depression Recession.

Below is an embedded YouTube video about visual illusions. As humans we are sometimes not capable of seeing reality when it right in front of us. In my opinion the greatest illusion is between nominal values and real values. Enjoy.

It is a long video (17 mins). If you want to jump to the visual illusions go the 2 minute mark.

Black Swan Insights


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