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Charting The Relative Performance Of Gold vs Treasurys Since The "Great Moderation"

Tyler Durden's picture




 

Due to tangential questions arising out of a parallel twitter-based conversation, we have been swamped with requests to demonstrate the performance of gold versus US Treasurys since the "great moderation" or the period of time benefiting the most from both the end of the Bretton-Woods system, or infinite fiat dilution, and the Volcker counter-inflationary protocols (infinite printing ot Treasury puts among others) which has led many to fallaciously believe the thought experiment (hopefully just that) that an infinity in outstanding US debt would mean zero in prevailing US interest rate. Anyway, here is the result.

 

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Wed, 08/17/2011 - 11:03 | 1568839 trav7777
trav7777's picture

Gold just has to catch up with the imaginary interest paid on all those USTs

Wed, 08/17/2011 - 11:07 | 1568851 LawsofPhysics
LawsofPhysics's picture

Damn, beat me to it Trav.  Yep mark to fantasy and skittle shitting unicorns forever!

Got physical?  Don't believe the financial fucknuts who are stealing your real wealth to live high on the hog right now, while you toil away from some imaginery interest or paper profit that won't have the purchasing to buy a can of dog food in the future.  When I say "physical" I mean ALL things of value to your survival.  Hedge accordingly (ironic isn't it?)

Wed, 08/17/2011 - 11:16 | 1568885 scatterbrains
scatterbrains's picture

Trav are you saying this comparison is flawed because it does not include interest paid + capital appreciation ? 

 

Wed, 08/17/2011 - 11:32 | 1568950 JW n FL
JW n FL's picture

Please do NOT! try to explain how T's do NOT! keep up with cost of living / inflation, you will give him a head ache.

Wed, 08/17/2011 - 11:38 | 1568975 trav7777
trav7777's picture

bonds pay a coupon...gold does not.  In a growth climate, that is why interest instruments outperform gold.  At the point when people realize that the coupon <= inflation, gold merely revalues to reflect that

Wed, 08/17/2011 - 11:41 | 1568985 theotheri
theotheri's picture

Ignore this racist idiot.  He doesn't have 2 cents to rub together.

Wed, 08/17/2011 - 12:05 | 1569013 JW n FL
JW n FL's picture

why am I a racist becuase Israel gives more money to the Lobby Whores in Washington DC than the Bankers on Wall Street?

http://en.wikipedia.org/wiki/USS_Liberty_incident

http://www.rachelcorrie.org/

http://archive.arabnews.com/?page=4&section=0&article=50929&d=3&m=9&y=2004

http://www.opensecrets.org/usearch/index.php?q=israel&cx=010677907462955562473%3Anlldkv0jvam&cof=FORID%3A11&searchButt.x=0&searchButt.y=0#1650

http://www.opensecrets.org/usearch/index.php?q=jewish&sa=Search&cx=010677907462955562473%3Anlldkv0jvam&cof=FORID%3A11#1650

 

Why am I a racist becuase the IEA has NEVER Inspected Dimona but has Inspected the Nuclear Plants in Iran?

Why am I a racist becuase Israel was the 1st to Terrorize?

Why am I anything because of someone elses actions?

You dont like me sourcing and sighting facts? and that is why I am a racist is more likely the Problem YOU! have with me.

Wed, 08/17/2011 - 16:40 | 1570391 theotheri
theotheri's picture

Both the Israeli and U.S. governments conducted inquiries and issued reports that concluded the attack was a mistake due to Israeli confusion about the identity of the USS Liberty.

 

FUK

YOU

MORON

 

Racism is deplorable.  Ban these assholes Tyler. Do the right thing.

Thu, 08/18/2011 - 01:11 | 1571622 ItsEvolutionBaby
ItsEvolutionBaby's picture

A rabid racist: Someone who notes racial differences.
A bigot: Someone ostensibly attached to an opinion you do not entertain.
Cry baby whimps positioning on an artifical vacuous moral position without posing any argument: You  

Wed, 08/17/2011 - 11:53 | 1569052 Flakmeister
Flakmeister's picture

The other side of the gold coin us oil.... that can give you your coupon...

I can only get a 15 yr total return history on PBT... from Morningstar, 17.16%,  not sure it this is average or CAGR

For SBR, the 15 yr total return is 17.55%.....

For HGT, ie. NG,  the 10 yr performance is 12.46%

Wed, 08/17/2011 - 11:40 | 1568984 theotheri
theotheri's picture

Fuck you racist prick. 

Wed, 08/17/2011 - 12:05 | 1569015 JW n FL
JW n FL's picture

why am I a racist becuase Israel gives more money to the Lobby Whores in Washington DC than the Bankers on Wall Street?

http://en.wikipedia.org/wiki/USS_Liberty_incident

http://www.rachelcorrie.org/

http://archive.arabnews.com/?page=4&section=0&article=50929&d=3&m=9&y=2004

http://www.opensecrets.org/usearch/index.php?q=israel&cx=010677907462955562473%3Anlldkv0jvam&cof=FORID%3A11&searchButt.x=0&searchButt.y=0#1650

http://www.opensecrets.org/usearch/index.php?q=jewish&sa=Search&cx=010677907462955562473%3Anlldkv0jvam&cof=FORID%3A11#1650

 

Why am I a racist becuase the IEA has NEVER Inspected Dimona but has Inspected the Nuclear Plants in Iran?

Why am I a racist becuase Israel was the 1st to Terrorize?

Why am I anything because of someone elses actions?

You dont like me sourcing and sighting facts? and that is why I am a racist is more likely the Problem YOU! have with me.

Wed, 08/17/2011 - 15:11 | 1569899 johngaltfla
johngaltfla's picture

Wow, super deflationary according to some. So it this though...

 

Dubai traders report 100% rise in gold bullion sales (Must be a bubble thing)

 

These bubbles must be because the Fed is contracting the money supplly and Treasury supply is tight, right?

Wed, 08/17/2011 - 11:09 | 1568846 speconomist
speconomist's picture

Boom, and the bomb exploded on Nouriel's face!

Wed, 08/17/2011 - 11:07 | 1568848 Irish66
Irish66's picture

Can you explain it simply?

Wed, 08/17/2011 - 11:19 | 1568893 ZeroPower
ZeroPower's picture

While i dont particularly agree, the general jist of it is that gold (orange line in upper chart) outperforms US paper over the long run, inflation or deflation. Again, it all depends whether youre the first sucker buying or the last sucker buying. Its all relative.

Wed, 08/17/2011 - 11:24 | 1568916 Irish66
Irish66's picture

thank you.  I don't tweet so I was lost and I'm not swift will charts.

Wed, 08/17/2011 - 11:28 | 1568935 dasein211
dasein211's picture

No it's not relative. At that time volcker was able to spike rates because the14.6trillion debt albatross wasn't hanging around our necks. Interest rates were low and debt was low so spiking it didn't implode the system. Same with japan. We are starting this phase with massive debt while interest rates are ALREADY at rock bottom. Japan could buy US treasuries and ride the spread for the last 20 years and was able to maintain 2 decades. We have no such luxury and that's why we are not japan. Gold was held in check because the rate of return was posti e on FRN's for a long while but if we spike rates now it's game over. Which is why in the end the only out we have is to print... Which is why we're fucked.

Wed, 08/17/2011 - 11:33 | 1568956 JW n FL
JW n FL's picture

and becuase China has no debt they are a much better bird then?

Wed, 08/17/2011 - 11:44 | 1569000 Seer
Seer's picture

At this point the hole in China's hull isn't as big, or visible.  The US's boat is already sinking.  Just haven't seen the extent of the hole in China's hull...  Voyage to the bottom of the sea...

Wed, 08/17/2011 - 11:58 | 1569078 JW n FL
JW n FL's picture

Brother Seer,

seriously? you are by far, if not one of the last people I would expect to take that bait??

which leads me to believe you are offering yourself up as the sacrificial lamb so that others may learn..

 

China has 1,200+% Leverage on ever Renminbi they print, before the ink dries.

China Builds Cities (6 to 8 a year) to maintain a positive measure of GDP.

 

When China buys treasuries it does NOTHING for America and DOES! everything for China!

Not only have we shipped 7 million PLUS! Manufacturing Jobs to China in the past 11 years..

We as well allow China to buy Treasuries which stabilizes the LIE of an economy that China Operates.

We are parceling off America to improve the Quality of Life of others around the World.

The U.S. Dollar has 120% + Leverage placed against it before the ink dries.

Even if we paid off our National Debt (thusly paying JP Morgan and others 6% interest on Monies printed out of thin air, or enjoying the fruits of pretending to do Gods Work) of $14 Trillion and took it all on our Books at home, here in the United States.. the Dollar would still be NO WHERE NEAR 1,200% Leverage!

 

China is NOT Buying America.. America is GIVING China Stability.. and China later on? for our Christian World View will do what? Buy our Debt with Renminbi that is WORTHLESS! we allow the lie, we stabilize and legitimize China's Bullshit 1,200% Leveraged Money supply that is based on a LIE of GDP created by building empty Cities+++.

 

Wed, 08/17/2011 - 12:13 | 1569142 ZeroPower
ZeroPower's picture

As writing a thorough response will likely lead no where with one who is incapable of understanding the context, this introduction to relative should help you even more: http://en.wikipedia.org/wiki/Relative_value_(philosophy)#Absolute_and_relative

 

Wed, 08/17/2011 - 11:07 | 1568850 Crisismode
Crisismode's picture

The crossover happened (it appears) almost exactly on 1/1/2010.

 

Hmmmm . . . funny that.

Wed, 08/17/2011 - 11:12 | 1568860 Everybodys All ...
Everybodys All American's picture

When the Treasuries begin to fail and they eventually will it will be an epic short.

Wed, 08/17/2011 - 12:53 | 1569298 Things that go bump
Things that go bump's picture

It will be kind of a pyrrhic victory if you don't get paid.  See Herstatt Bank failure. 

Wed, 08/17/2011 - 11:12 | 1568865 Global Hunter
Global Hunter's picture

stupid academics picking fights about things they don't understand.

Wed, 08/17/2011 - 11:15 | 1568873 doomandbloom
doomandbloom's picture

Obtaining PhD's and other high degrees tricks the people into believing that they know something..and then its downhill after that.

Wed, 08/17/2011 - 11:44 | 1568996 MichaelG
MichaelG's picture

And fake-ass Nobel prizes.

Wed, 08/17/2011 - 11:44 | 1568997 MichaelG
MichaelG's picture

I only hit the button once!

Wed, 08/17/2011 - 12:55 | 1569310 Flakmeister
Flakmeister's picture

Downing effect on display here....

Wed, 08/17/2011 - 11:16 | 1568883 buzzsaw99
buzzsaw99's picture

Well look at that, both trending upwards. Those dumb ass treasury holders! Only gold buyer ar smart.

Wed, 08/17/2011 - 11:27 | 1568921 SMG
SMG's picture

The Oligarchy, who Roubini is one of,  still has control of the paper gold market.  

All it would take no QE in the near future and austerity, and Roubini will come out looking like a genius.

Tyler be careful, all this noise they're making at you could be a setup to make you look bad. 

Dollar destruction is inevitable, but they could screw the timing of it to make you look bad and cover it up.

 

Wed, 08/17/2011 - 11:49 | 1569023 Seer
Seer's picture

"All it would take no QE in the near future and austerity, and Roubini will come out looking like a genius."

Not going to happen.  Fundamentals are fundamentals.  That the USD is destined to end/die isn't even in question (here that is- what Roubini or other panderers of TPTB thinks doesn't matter).  I'm guessing that this is Tyler's position: his isn't based on short-term/myopic service-to-TPTB thinking.

Wed, 08/17/2011 - 11:58 | 1569071 Hook Line and S...
Hook Line and Sphincter's picture

Fundamentals are fundamentals, but I know a girl who I told, and still thinks that I have a 12 incher, and that was almost 20 years ago.

Wed, 08/17/2011 - 11:30 | 1568946 Zero Debt
Zero Debt's picture

Dead metal in the ground - Vibrant US Economy: 1-0

Can someone wake up the management?

 

Wed, 08/17/2011 - 11:32 | 1568952 swissaustrian
swissaustrian's picture

This is nothing, wait until inflationary expectations get priced into bonds...

Wed, 08/17/2011 - 11:35 | 1568963 PulauHantu29
PulauHantu29's picture

Here is what Bill Bonner at The Daily Reckoning says:

"The curse of zero

By Bill Bonner
Poitou, France

Permanent zero. That’s what Edward Harrison calls the Fed’s new policy of guaranteeing ultra-low interest rates for the next two years.

But first, let’s look at what happened yesterday. Gold soared $21... again, setting a record. It’s back near $1,800.

The Dow fell 76 points. The FTSE was just about breakeven. Not much of a follow up to the bullish day on Monday. Maybe investors are catching on. Maybe they realise that we are in a ‘zero stage’ economy.

Zero is a funny number. It is not a number at all. When you say there are ‘zero’ doughnuts on the table, how many are there? None at all. There are no doughnuts on the table. So how many is zero?

And what happens when you add zeros together? Nothing. But when you multiply by zero something extraordinary happens... something becomes nothing. No kidding. Zero times six = 0. Zero times the entire federal deficit equals zero. Want to make something disappear? Multiply it by zero.

And what happens when you multiply a Great Correction economy by zero rates of interest? Hey, that’s what we’re finding out."

 

cont:

http://dailyreckoning.com/

Wed, 08/17/2011 - 11:52 | 1569040 tip e. canoe
tip e. canoe's picture

from A Brief History of Zero

http://www.mediatinker.com/blog/archives/008821.html

"A striking note about the Hindu zero is that, unlike the Babylonian and Mayan zero, the Hindu zero symbol came to be understood as meaning “nothing.” This is probably because of the use of number words that preceded the symbolic zero."

Wed, 08/17/2011 - 12:30 | 1569198 NotApplicable
NotApplicable's picture

Zero is also the 'space' required to hold infinity.

ZIRP4EVA = Infinite debt at no cost.

Will they pull it off? Certainly not in today's economic market. However, in tomorrow's political one, who knows?

They will flatten the curve, until it flattens them.

Wed, 08/17/2011 - 11:38 | 1568967 Mercury
Mercury's picture

yes, a reminder that it's worth checking out Roubini vs. ZH on Twitter every now and again....

Wed, 08/17/2011 - 11:55 | 1569061 Buckaroo Banzai
Buckaroo Banzai's picture

I am surprised that the crossover only happened in 2010. My guess is it would have been a few years earlier. Treasuries sure were a great investment for a long time. Operative word: WERE.

Wed, 08/17/2011 - 11:58 | 1569082 Flakmeister
Flakmeister's picture

Hey Tyler, I don't have a Bloomberg anymore... Could you post the Total return vs Treasuries and Gold for PBT and SBR, they have been around since the early '80s

Wed, 08/17/2011 - 12:00 | 1569091 gwar5
gwar5's picture

 

Interesting, but wasn't the gold price artificially suppressed for decades by Central Bank selling and leasing, while at the same time they were leveraging the gold in their vaults x20 in a shadow fractional banking system, reflecting it's true value? 

If all that were taken into account, the value of gold would be very much higher.

 

Wed, 08/17/2011 - 15:16 | 1569920 Panafrican Funk...
Panafrican Funktron Robot's picture

It doesn't really matter.  They control what the dollar exchange is for the metal.  They have allowed it to appreciate.  They can just as easily not allow it to appreciate any more, or, depreciate on a dollar adjusted basis.  Dollars are just symbols.  As long as people keep using dollars (or other paper currencies) as a medium of exchange, they can decide what the exchange rates are for goods.  Look, I get it.  It's psychologically comforting to buy gold and feel like we're really "sticking it to the man", and we even see real gains when we see that gold increase in dollar price, and we can even realize those real gains by either directly exchanging that gold for other, tangible stuff, or exchanging through the dollar medium.  But the point remains, the dollar is still mentally the medium of exchange in either scenario.  Because we, collectively, accept the dollar as a medium of exchange, there is no reason the dollar value of gold couldn't be at $250/oz tomorrow.  We, collectively, continue to allow our brains to be abdicated by this concept.  This isn't even really an argument against exchanging dollars for gold in this current environment, I would suggest no less than 1/3rd of dollar denominated investment holdings should be in gold, it's more just saying, we're really just along for the ride, and we are collectively deciding not to be the ones pulling the levers.

Wed, 08/17/2011 - 12:15 | 1569149 chartcruzer
chartcruzer's picture

here are most major asset prices normalized to the price of gold.

you can now track in real time.

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3225058&cmd=show[s240729620]&disp=P

Wed, 08/17/2011 - 13:00 | 1569227 Temporalist
Temporalist's picture
Venezuela Plans to Move Reserve Funds

"CARACAS—Venezuela plans to transfer billions of dollars in cash reserves from abroad to banks in Russia, China and Brazil and tons of gold from European banks to its central bank vaults, according to documents reviewed Tuesday by The Wall Street Journal."

"Lately, senior Venezuelan officials have criticized Venezuela's dependence on the dollar. Last Saturday, Venezuelan Foreign Minister Nicolas Maduro said the world's financial system, based on the dollar, "had entered into a crisis of uncertainty and we are planning to construct a new international monetary system, and especially in South America, protect ourselves from this situation," he said.

The Bank of England recently received a request from the Venezuelan government about transferring the 99 tons of gold Venezuela holds in the bank back to Venezuela, said a person familiar with the matter. A spokesman from the Bank of England declined to comment whether Venezuela had any gold on deposit at the bank."

http://online.wsj.com/article/SB1000142405311190339290457651296118057069...

 

Venezuela May Move Reserves From U.S. to ‘Allied’ Countries, Says Lawmaker

"Of Venezuela’s $18 billion in gold reserves, $11 billion is held abroad and could be transported back to Venezuela, Montoya said, citing a document he said he obtained from the ministry."

http://www.bloomberg.com/news/2011-08-16/venezuela-may-move-reserves-fro...

 

 

 

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