I love a stock-index-to-gold ratio (see my earlier Chart of the DJIA priced in gold). Zero Hedge has calculated the performance of the S&P500 in gold over the last 18 months. It’s scary stuff. Here, in his inimitable style, is Tyler:
It may come as a surprise to some that when the market’s performance is expressed in the opposite of infinitely dilutable paper, we are currently just barely 15% higher than the generational S&P low of 666. As the chart below demonstrates, the S&P expressed in gold is plunging, and has dropped 22% from its 2010 highs, down 18% from the beginning of the year, and just 15% higher than March 5, 2009. As Russia and GLD have been demonstrating so aptly over the past 5 months, gold is not dilutable, and can not be contaminated with various Greek sovereign bond holdings. It is, in summary, pure, and is immune from that strain of 100% lethal, and printerborne, Central Banking syphilis where one’s paper rots off. Which is why the Dow may easily pass 36,000. The issue is that at or about that time, the Dow to Gold ratio will be 1. Note also, the downward channel in the SPX/Gold index: each day this channel is not broken, is another day that Bernanke pops a few extra Ambien.
S&P500 in gold since January 2009:
S&P500 in gold since 2005:
Greenbackd 
Hey Parker,
I would not try to assume that stocks are a good inflation hedge… Corporations have to buy raw materials and have to feed hungry workers… When the price of oil and foold go up it is very hard for corporations to improve on earnings, so if you think about it, much of the benefits of a rise in CPI are negated by a rise in raw materials prices… Put more bluntly, we are in a period of stagflation right now. IF you want to research more on the price of Gold, search youtube for videos by Jim Rogers and David Walker, the former comptroller general — just because Gold may rise to $5000 an ounce does not neccessarily mean our economy must or will improve to the levels that would see stock price appreciation — its scary, I know… But its best to be well informed!
By the way, I am buying farmland… think its a deep value guys way to play the boom in stuff.
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There are all sorts of ways of measuring the fundamental value of stocks. How do you measure the fundamental value of gold? Does gold even have a fundamental value?
It seems to me that if humanity had developed on a world without copper, or iron, or oil, that would have slowed us down a good deal. If we’d developed on a world without gold, then so what?
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So where do you hide from the scourge of central bank inflation when everyone else has already beaten you to gold?
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It’s all relative. People who are bearish on gold, like me, and think gold may be in a bubble wouldn’t be surprised by the quoted observation. As long as gold keeps going up and up, the collapse in stocks would look worse than it is.
However, if gold were to crash (say due to deflation) then the collapse in stocks wouldn’t look so bad.
If you look at the market in terms of, say, crude oil or the CRB index, it wouldn’t be so bad.
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