1) Armstrong never factored in (out) Dollar Inflation from his historical work. Dollar inflation affects/ effects the look of the charts tremendously leaving tops and bottoms in different places on the charts…………..think “value.” Thus, though all of his work was based off of the “stock markets”, he doesn’t know “what will top or bottom” at his cycle tops or bottoms………..his words. So, he suggested maybe the Dollar would top recently. That is because it is the supply/ demand for the Dollar that is swamping the supply demand for the stocks he based his work on. He never removed the second variable that can swamp the supply/ demand curve for stocks before he did his work. Thus, since we are in a period of Dollar inflation like the 70’s where the economy was weak, we can use that period for the “cycle”, but since the Dollar inflation is much, much higher now, the Dow could go much higher if the Dollar Inflation is high enough…….and the Dow and Gold could even meet at new highs……..or even much higher highs.
Thus, Armstrong’s work can/ will be correct in terms of the “time component” of the cycles to a large extent, but his work cannot be correct in terms of “price” unless the psychology of the markets is grossly following his work.
2) From the equivalent of the Deflation Scare lows of late 08/ early 09, it was the PM explorers that really took off in the late 70’s. Why? Well, the valuations of “reserves” were most dramatically affected by the rising PM pricing- at least compared to the rise in price for the producers. A rise in Gold from say 750 to 5,000 is a 6.67 bagger increase for a producer, but the producer also has to deal with a rising cost factor as the commodities also rose in that period (though not as aggressively as the PMs.) Yet, the rise in prices for reserves were bigger on a percentage basis from the collapsed low at that bottom to the top…………and there was a massive move of inferred resources to reserves as lower grades moved up to the reserve camp so that a “good explorer” may have had reserves double or more along with the valuation rises.
Thus, as far as I can tell by looking at the few PM stocks from the late 70’s that I can find, the best explorers rose pretty well non=stop from the equivalent of the 08 DS low to the top and beyond in a true parabola. The true explorers had no “drag” from rising costs, and as the parabola moved higher they probably had no problem getting financing (their major negative going into the deflation scare) as investors flooded into the PM sector. Just take one look at China suddenly doing massive deals for resource stocks as we approach the time period for take-off. For China, the “gloves have suddenly been taken off.”
Some were saying during the depths of the deflation scare that without Dollar inflation being created through the FRB system there would not be enough “velocity of money” to create rising prices. Our argument was that as things like the Bond market fell, along with foreign countries trying to abandon the Dollar, there would be a tsunami of money velocity………actually in many currencies. As Deadeye correctly says, the Bond market is the largest market in the world.
As I have long held due to the cycle, 2010 will usher in the start of the more aggressive parabola for the PMs with the move being firmly in place by mid-2010 to late 2010………but I defined that as Gold moving up through 1450 to 1500. The move will start before that with the analogy to the late 70’s being a move up through 1,000, then a final re-test of the “old highs.”
wj