Source: CRB Infotech
Let us first consider an important relationship of Gold/Crude during secular bull/bear markets as well as super-cycles. The 40-some-odd year average is roughly 16.50 as shown in chart #1. In mid 2005 and 2008 we saw this ratio drop below 6 which is insanely low. "Black Gold", as it was being referred to, was being treated as an asset class along side of gold. However, when the shit hit the fan it became obvious which of the two was actually an asset class. As of Friday's close the Gold/Crude ratio is now at 16, erasing an 8 year downtrend in just 4 months. Had you been long gold/short crude you would be better off than Citi. In fact, it is my humble opinion this trade will work for the foreseable future, as a new super-cycle has been born. Expect to see similar peaks in the ratio over the next decade.
I like to Gold Miners here in th near-term, providing the market has follow-through and a counter-trend rally ensues. These have had a terrible beat-down the last couple of months, along with everything else. Goldcorp is just one of my personal favorites which I currently hold. It was up like 3 brazillion percent on Friday. The miners should outperform the metal itself over the next several weeks providing there is a market rally. I own both, longterm on the metal, trading the miners.
I found this interesting and wanted to illustrate a measured move on the TLT weekly, as well the the daily which completed the larger measured move last week. Despite several calls for a Treasury bubble, most shorts crapped their pants on Thursday. I do have a calendar spread (Nov/Dec) so with a little luck here TLT pulls back with a rally. Worst case scenario I can try to become a bank holding company and exchange these toxic puts for some Treasuries. As far as the Treasury Bubble goes, Mish warns shorts before the recent moves:
Those looking for a "bubble in bonds", need look no further than Japan. 10 year bonds at 1.5% are proof of how low yields can go. Those who see a bond bubble in the US, right here right now, are barking up the wrong tree.
Perhaps now, and only here, shorting treasuries gives a decent risk/reward.
