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Good observation. Something to consider from Michael.

My comment is time is far more predictable than price. The violence or volatility of the action during the hemorrhage phase is likely to exceed that of the 70’s. Whether that pushes the ratio below the lower band will be determined by policy decisions yet to be made.

The main point of this charts is that gold will continue to outperform stocks until the economic cycle is complete.

Hi Eric,
First of all, my congratulation on and appreciations for your blog and the contributions to Jim Sinclair's website that you make - I have been following both for quite a while now.

Please allow me a question/ comment on your recent posting :

http://business-money-and-finance.blogspot.com/2010/05/two-charts-central-bankers-dont-want.html

I am a huge fan of the Stocks to Gold Ratio, in fact I consider it to be my primary guide to long term investing - it is like a light tower above all the daily and weekly, possibly even monthly market noise.

I have a slightly different view though on the chart analysis you made in that a.m. post, and maybe you'd like to explain your assessment a bit further.
(this one: https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiCcb9jIsb579SST83p80h7VFretjjOg4g2Uk58dSblYdKndsownlkcI-mQ32QykOyzZm4tSl3zjsp3daW3te41xHlFqYCCLlM3eLw2L82qVDUTZIvMXq8fdqZEhgJQP5ABtcto-RCgr70G/s1600/LCSCAGOLDR.JPG)
Without really being able to give a rational explanation for my gutfeel, I believe the Stocks/Gold ratio is going to fall further in this cycle than you drew it in your picture. My reasoning is that our financial system is much more out of whack in every nook and cranny than in the 1930s and also more than in the 1970. In other words, I am fairly convinced that the volatility of the adjustment will be even more violent than in the late 1970s.

Thus my expectation that it might be more appropriate to use an expanding triangle in that graph you made, rather than the parallel lines you used.

I am thus expecting that the DJ-Gold ratio will indeed fall to 1 or -briefly-even below 1. I expect they will meet somewhere between 5000 and 7000 which will of course be the stock buying opportunity of our lifetime. I expect it will be a phase of gut-wrenching volatility, and I do hope that I will have the balls to give up my precious metal stock to buy good stocks in a phase of chaos.

I have attached a crudely retouched graph to this mail, and I'd be most pleased if you found the time to comment and explain your view on my thoughts !

U.S. Large Cap Stocks Capital Appreciation Index (LCSCAI); S&P 500 to Gold Ratio: