Monday, March 11, 2013

Dow, S&P 500 Gain for Seventh Straight Session; Gold, Silver Compared to Stocks OK

In this liquidity-driven environment, there's almost no risk of downside, and traders have recently taken advantage, boosting the Dow to all-time record highs and the S&P to within 10 points of its best close ever.

In 2013 alone, the Dow is up an astounding 11%, the S&P is higher by 9%. At hose rates of returns, anyone with more than $50,000 in stocks might as well just sit back and watch the money roll in because annual returns would be something on the order of 40-50%.

Nothing lasts forever, however, and there's a 100% certainty that this bull market, now entering its 49th month, will end and a major selloff - of 20-35% - will occur within the next 15 months. Market wisdom puts the long tooth of bull markets at around 63 months, so, by this time next year, the indices offer a very good chance of being lower than they are today. Such is the nature of risk assets, especially in an environment of artificial price supports, low volume, questionable valuations and the lack of a reliable price discovery process.

Granted, stocks - in terms of the Dow Jones and S&P indices - have more than doubled since the '08-09 collapse, but what about gold and silver, the two most widely-held precious metals?

Holders of physical metals have not done too badly, even considering the recent turn of fortune to the downside.

During the latter months of 2008 and the first three months of 2009, according to data from, gold could be had for anywhere between $712 and $989 per ounce. Silver traded in a range of $8.80 to $14.39 per ounce during the same time frame.

So, to those who deride stocks over precious metals and ridicule the so-called gold - and silver - bugs, they've gotten it all wrong, as both of the most-popular metals have done exceedingly well, especially silver, which has more than tripled in value form its low point in 2008. Gold, if scaled in on a dollar cost average basis (one of the best ways to buy either stocks or bonds) could easily have produced 100% or better returns during the "financial crisis," which, by the way, is still not finished.

Dow 14,447.29, +50.22 (0.35%)
NASDAQ 3,252.87, +8.50 (0.26%)
S&P 500 1,556.22, +5.04 (0.32%)
NYSE Composite 9,075.76, +21.31 (0.24%)
NASDAQ Volume 1,594,585,125
NYSE Volume 3,091,224,000
Combined NYSE & NASDAQ Advance - Decline: 3384-2006
Combined NYSE & NASDAQ New highs - New lows: 518-27
WTI crude oil: 92.06, +0.11
Gold: 1,578.00, +1.10
Silver: 28.85, -0.095

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