Charting David Rosenberg's Thesis: "No Gold Bubble Until $3,000"

Today's "Breakfast with Dave" from David Rosenberg is a veritable chartapalooza, the inspiration for which appears to have been the "reversion to the mean" theme presented in yesterday's IMF chartpack, presented here. There is, however, one section that is unique: that dealing with gold, and more specifically, why in Rosenberg's opinion gold is still quite cheap and why it is trading at about 50% of what the Gluskin Sheff strategist would consider bubble value. As Rosie says: "we have liked gold for a long time and we remain very constructive. It is more than just a hedge against recurring bouts of global financial volatility. The growth rate of gold production is roughly stagnant while the growth rate of fiat currency in most parts of the world continues to accelerate. It's all about relative supply curves - the supply curve for bullion is far more inelastic than is the case for paper money. It really is that simple." Indeed it is: when one strips out all the fancy talk, mumbo jumbo, and syllogistic gibberish out of modern economic theories, be they neoclassical Keynesianism (or, god forbid, just classical), chartalism (sorry, infinite debt-money issuance won't work: in two years we will all see why), or any other attempts to reduce a broken imbalance in supply and demand propped up by the "invisible hand", it is all about supply and demand. Sure enough, one thing we have an infinite supply of is fiat money, and the resulting debt necessary to "back it up." As for demand, well that's another matter. With gold: it is just a little inverted.

So here are Rosie's charts many of which we have presented in the past, but always good to see once again.

Gold, viewed from the prism of Supply and the US monetary base:

Gold and M2: "Whether you normalize gold by the money supply or the CPI, the bull market has a long way to go. By my estimates, this does not even turn into a bubble until we get north of $300 an ounce."

More: "when gold hit its bubble climax in 1980, it got to 5x the level of the S&P 500; today gold is 20% higher. No bubble in this chart, yet anyhow."

"The story is just as valid when gold is measured in "bond index" terms (using the Ryan labs historical data for treasuries)

"Gold market cap in S&P 500 is $26 billion... only 0.2% of the entire market"

And the last observation: "gold company EPS has been blowout with earnings rising 34% in the past year and 220% in the past two years."