S&P 500:

That’s not a projection for a final bottom, by the way… that would be lower.

Gold, from 1971 (Richard ”I am now a Keynesian in economics” Nixon):

Note: Under Bretton Woods, the dollar of course was pegged at 35 to the ounce from 1933 to 1971.

Gold has been in a parabolic move since ‘04, and the degree of speculative interest got high enough to call it a mania, just like every other asset class this past decade. It is money, though, so although I expect some frightful drops, on the whole gold will preserve your capital through the mayhem. The high inflation that everyone has thought is right around the corner since 2007 could actually happen several years from now after enough debt has been wiped away to end deflation. In that case, history says the best assets could instead be real estate (leverage!) and agricultural commodities (government-induced shortages). *Professor Jastram showed that gold, as a form of money, doesn’t do as well in real terms in inflation as most people think, though it sure beats paper money during high inflation.

Remember, 1980 - 2001 was an inflationary period. So was 2001-2008, so go figure — I figure gold did well in the latter inflation because there was a commodity mania. Since 2008 you could say it has been strong for the “right reasons” - financial panic and deflation. That said, it still gets ahead of itself and does tend to fall with other commodities when the margin loan department calls.

US Dollar Index:

More deflationary panic ahead — what’s so great about all the other fiat currencies? Why is everyone so afraid of the dollar? Answers: nothing, and because it fell for 7 years.

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*Here is a free paper by Jastram I found on Scribd: The Behavior of Gold under Deflation