The McAlvany Weekly Commentary
with David McAlvany and Kevin Orrick
Kevin: David, some people have been in this business so long that they have seen cycles, but they have also seen secular trends. Before we bring our guest on, I would like to have you explain the difference between a cyclical trend and a secular trend so that our listeners can understand what he is saying.
David: Absolutely, and Ian McAvity has been writing about the market since 1972, but actually involved in the market since 1961.
Kevin: Before either one of us was born. He does have a view that we couldn’t possibly have.
David: I think a particularly unique perspective, dealing with natural resources, because Canada, and Toronto, specifically, is a real hub for natural resource development, and it is a major contribution to the Canadian gross national product or gross domestic product.
Kevin: It is interesting, Toronto almost reminds me of the Switzerland of the North American continent, because we have clients right now who do store some of their gold in Switzerland, but Toronto has opened up as well. If you look at Toronto, the Toronto exchange, everything involved in Toronto, it just oozes of gold.
David: You’re right, because as a financial center, it is one of the North American primary financial centers, even more so than San Francisco or Chicago, it is sort of New York-Toronto, and we sometimes forget that, being very American-centric.
The question of secular versus cyclical: Really, if you want to translate that, primary could be substituted for secular, and secondary could be substituted for cyclical, so the primary trends, the longer-term trends, are what we are calling secular. The shorter-term, the smaller, intermediate trends, are the secondary, or cyclical trends.
If you want to think of it this way, when the tide comes in or goes out, that is a primary trend, or that is a secular trend. But even in the context of the tide coming in, or the tide going out, those big primary trends, you also have the waves rolling in or rolling out, and those are the smaller cyclicals, happening at the same time, but just with a different importance.
Kevin: David, your family has been very much into the primary first. In other words, look at the long-term trends. Sometimes those trends will last 25 or 30 years, such as the interest rate cycle or the gold-Dow ratio, things we have talked about before. The short-term trader; however, the person who is just trying to watch financial TV, they are playing the cycle. They don’t really care what the primary trend is, because they are in and out before they actually recognize what that is.
With primary trend watching, the person who is listening to this program, for the most part, is a person who is trying to protect the value of their long-term savings. Primary trends – that is where that becomes important.
David: We have seen the world shrink in terms of its time frame, from, as we mentioned last week, managing for a quarter of a century, down to managing assets for the next quarter, but quite frankly, traders have a fixation with monthly, weekly, daily, hourly, down to the millisecond, in terms of what they are interested in, whether they are interested in holding, and the rate of turnover in their portfolio.
So you can look at that cyclical on a very micro scale, and again, I think for perspective, the long-term investor is going to be well-served by identifying the primary trends, those secular trends that last for a long period of time, and that really sets the stage for anything else that may be happening, and gives you a better understanding of what those smaller iterations are, as they occur. Let’s not confuse the small trends with the larger and the bigger picture.
Kevin: Ian McAvity has had 50 years of experience. He has not only experienced the long-term secular trends, but he also writes an excellent letter on short-term cyclical moods, as well. He is a technician in the market.
David: That’s right – Deliberations on World Events – it is a fabulous publication. Writing Deliberations from the 1970s – this is a small community of thinkers, of writers. My dad has been a part of that, the Aden sisters, Jim Dines, Richard Russell. It is a small community of people who have been thinking, and writing, and publishing for decades.
Kevin: David, some of these guys, I would like to get inside their heads. I like to listen to what your dad’s thoughts are, because he has looked at this carefully for decades, and the same thing with Ian McAvity. Like you said, the Aden sisters bring the longer-term perspective to the markets, and Harry Schultz. Think about how long Harry Schultz wrote his letter.
Let’s go ahead and go to your conversation with Ian.
David: In our last conversation we noted that you have been writing Deliberations since about 1972. We had gotten into the investment business about that same time, and your reflections have been very prescient through the years, with a focus on technical analysis and, of course, not neglecting the fundamentals, but there is a great story to be told in the charts, and there are a number of things we want to look at today, starting with the Dow-Jones Industrial Average, and the S&P 500. Let’s just begin with this. Other than counterfeiting, what could fuel the market’s rise another 15-20% from here?
Ian McAvity: I don’t see the market going much higher from here. I think we are basically in the vicinity of a very significant top. As far as I am concerned, the majority of the market really topped out back in 2011, and we have seen higher highs on some U.S. indices since then, but 13 out of 15 world markets that I track have not made higher highs in 2012, and some of the broader indexes in the U.S. have also not made higher highs, so as far as I am concerned, we are at the top of a cycle within this secular trend that really dates from 2000, and in my view, I think we are going down a lot more than people think.
David: The volume through the summer months was lackluster, prices were still on the rise, and maybe that was just levitation, holding out hopes for QE-3. We have had past periods that were somewhat reminiscent of this, 1907, 1987. It feels a little bit like we are venturing onto thin ice, with a potential decline. I don’t know if it is 15-20%, but a Dow 11,000, a Dow 10,000, let’s talk about what a top would signify. If it is a cyclical top in the context of a secular bear market starting in 2000, as you just mentioned, where could we go from here?
Ian: Cyclical bears within a secular bear tend to run twice as long as the bear markets that you see in secular up-trend periods, and they also tend to cut a lot deeper. In a lot of the talks that I give, I point out that in the secular bull phases, the average bear is over in about seven months and it only falls about 20%. But in the secular sideways or down period, such as I think we have been in for the past decade, the bear markets tend to run for about 18 months, and lose an average of about 32%. That is excluding the distortion caused by 1929-1932.
I hear people talking about how we are going into a cyclical bull market, but I don’t think that they grasp the significance of being still within the secular sideways to down period. I think that is part of the problem that the Fed has. I think the Fed is still thinking that this is somehow cyclical, rather than secular. They keep pumping money into the trading desks in New York, and then they are surprised that that money also flows not just into the stock market, but also into the commodities markets, and other markets.
In the shorter term, I think we have seen a really large worrisome disparity showing up just in the old-fashioned Dow theory, between the Dow Industrials making higher highs, and the Dow transports not making higher highs, and in fact, the transports not far from breaking down to really giving an extremely negative signal. People think of the Dow theory as being esoteric, but if you just think of the industrials reflecting the hopes and expectations of the manufacturing process, on the one hand, and the transports being the industry that gets those manufactures to market, there is quite a disparity between the makers of things and the carriers of things, going in different directions. I am very worried about what I see in the transportation sector.
David: That is certainly supported with an increase in inventories, channel stuffing, as it is often called, where manufacturing has yet to slow, but delivery of products to the end consumer is still failing in support of that. When we look at the period of 1968-1982, we had a period where, essentially, we had prices capped. It was a bear market, but it wasn’t a catastrophic bear, like 1929-1932, and yet, if you were looking at real impact to a portfolio, by the time you got to the late 1970s and early 1980s, because inflation was on the rise, could you argue that the bite was as bad as that 1929-1932 period?
Ian: If you look at the Dow on an inflation-adjusted basis, it peaked in early 1966, and finally declined in 1982, with an overall decline that probably rivaled 1929-1932. It may have been a little bit less, but pretty close to it. That is assuming how much confidence you have in the CPI that you are inflation-adjusting with. My confidence in any data coming out of Washington has been deteriorating at an accelerating pace over the last two decades.
David: Yes, to me it is a little bit like the frog being boiled slowly, or the lobster being in the pot. It happens slow enough you don’t know it’s happening to you, and by the time we had covered a good 10-15 year period, people didn’t realize just how much money they were losing. There was no impetus for action. Contrast that with the 1930s and there was probably more sensitivity to what was happening in the marketplace. I guess if there is any similarity that I am drawing to the 1966-1982 period, it is that complacency reigns. How do you feel about that?
Ian: Very much so. Bear in mind it was March of 1968 when Lyndon Johnson brought in the so-called Great Society, and that really was the big turning point, to me, in post-war America, when he basically said we were going to have guns and butter and not pay for it. That was the beginning of the really crazy deficit phase, even though deficits had been there previously, and it was that 1968 Guns and Butter speech that subsequently led to the French and the Swiss demanding the exchange of their dollars for U.S. gold, that led to Nixon closing the gold window in 1971, and we went to a complete fiat currency system. It took several years for all that to unfold, but in many respects, it was that 1968-1971 period that set the stage for the next decade, and there are more than a few similarities today to that period.
David: Going back to comments on the Dow and the S&P, if we saw prices continue to rise, the potential for a huge double-top exists at the old highs of 14,165, or on the S&P at about 1565. We have had a capped price at about 900, if you are looking at the Russell 2000, and it is perhaps a more dramatic look, looking at these two major averages of the S&P and the Dow.
Again, going back to the cyclical bear, within the context of a secular bear, and looking at a massive double top developed over the 2007 to present period, as a chartist, what could you predicate, in terms of downside, on that basis?
Ian: I think we are going to go back and see the March 2009 lows before this is all done. It is not all going to happen in one stage, but to me, they have essentially extended this cycle by about 12 months, dragging it on and on, and we are going to pay for that on the other side, because the more you extend it in the one direction, the laws of physics take over and create the equal but opposite reaction on the other.
In my view, for the balance of 2012, I think people are way too optimistic and 2013-2014, I think, is going to be quite challenging. We have a global slowdown under way that is, in many respects, still accelerating. It was sort of ironic over the weekend, to see some data in which they were aghast that Spain’s government thought the GDP ratio was going to be 90%. I sort of chuckled, because that’s better than the United States, but the U.S. commentators didn’t bother to point that out.
David: Well, it is a global slowdown we are talking about, and so perhaps with that as a backdrop we could talk about the election and what, if any, import it is in terms of the global financial markets. If Obama wins, what is the likely direction of the equity market in 6, 12, 24 months? Or a Romney win, what is the likely direction? Is there much difference in terms of outcome, in your opinion?
Ian: Frankly, I think, just looking at everything I’m seeing in the election, it certainly looks like Obama is going to get re-elected. My larger concern is whether Harry Reid continues to control the Senate, and if we have the same morass that we have been in for the last two years, to me, that is the most bearish outcome of all. I keep hearing people talk about somehow or other, in the lame duck period, they are going to “do the right thing” and extend the so-called fiscal cliff. These are the people who created that fiscal cliff, and after the election results, they are all going to hate each other even more, and I think it takes a huge leap of faith to assume that this Congress will do anything intelligent.
The net result is, I am very concerned about the economic shock that is in store for the U.S. economy in the first quarter, because I don’t know that they are going to get to the so-called fiscal cliff averted, and when I hear them talking about how they will clean it up later and make it retroactive, how is a businessman supposed to plan his business on tax policy that is going to be fixed later, retroactively? That is going to paralyze the decision-making process.
Even before January 1, if people are going to have to make economic decisions on how they manage their business, for example, whether they are going to have 52 employees or 48 employees, they have to give notice 30-60-90 days before that change takes place, and they are talking about fixing something after the election or before Christmas. It’s absolutely insane. The political process, to me, has just completely broken down in Washington.
David: When we look at that 2013-2014 period, then it’s both a global issue, in terms of slowdown, as well as a domestic issue, and before we move on to broader economic concerns, with limited exceptions, the stock market has been a pretty good indicator of who the victor would be. Looking at some of the studies that have been done there, you just suggested Obama is likely to be the winner. Are you looking at something as the basis for that?
Ian: Yes, there is one chart that clearly says that whatever the Dow does in the 60 days up to the election will govern who wins the election. In essence, we closed at 13,091 on the Dow on the 31st of August, and what I have inferred from that is that if the Dow is above 13,222, then Obama will be the victor, and if the Dow is below 13,000, or below 12,960, that would be 1% down from the end of August, then Romney would be the winner.
It is sort of ironic to watch how we are fighting around that 13,000 level and I would not be surprised if there aren’t a few hidden hands in there trying to make sure that the Dow stays well above 13,000 between now and election day. But whenever I see alleged hidden hands in markets, basically, they paint red circles on themselves and become targets for traders to shoot for. So I am very skeptical. I think the market could face some quite serious downside risk coming in before the election, even in spite of the presumption that somehow Bernanke’s mandate is to get the market up between now and year-end. I am very skeptical of that.
David: Looking at gold in a broader context, we have talked about the fact that the slowdown, 13 of the 15 stock market indices that you look at globally have not recovered fully, and so the idea that this is certainly a broader issue leads well into the conversation about gold. We have seen demand for gold on a global basis increasing from the ’70s, ’80s, into the ’90s. It used to be a North American and European dominated market in the physical world, and now it is an Indian subcontinent and Asian dominated market. Let’s look at how gold fared in other currencies. We have just been through a year-long corrective phase in U.S. dollar terms, but, again, for the international gold investor, what is the view from there?
Ian: Well, for starters, it has already made a new high against the euro, which would be the other critical one. Bear in mind that, in essence, when you look at global foreign exchange reserves, as declared, there are about 60% in dollars, and about 27% denominated in euros, so it’s gold against the dollar and gold against the euro that matters most. We have already made a new high against the euro on this recent round, and we are currently fighting with the 1800 level and the prior peak at 1900, in dollar terms. But in my view, we have now got the 50-day moving average having made the golden cross back up through the 200-day moving average that says we have now started the 6th leg of this up-cycle in gold that dates back to 2001. We have completed the correction.
David: Maybe you can fill out some of the details on what a golden cross is, the 50-day moving average crossing the 200-day moving average, a technical buy signal, is that correct?
Ian: It is not so much a buy signal as it is a lagging trend confirmation signal that the major trend has changed back up. When you are in a secular up-trend, as the gold price has been, it is not the sort of thing that on the day it happens it becomes a buy signal, because you would have already seen it in an assortment of shorter-term moving averages. But the history of the gold 50-200 ratio has been very strong, and with very, very few false starts.
That is one of the reasons why I pay as much attention to it as I do, and, in my view at this point, we now have the 50-day moving average rising at a faster rate than the 200-day, and the 50 crossed up through the 200 about a week ago, to confirm that this little breakout of the downtrend line of the last few months is real. We have tested the 1550-1625 area three or four times over the past year, and we are now going in the other direction to try to confirm a breakout by going through 1800.
Go through 1800, go through 1900, and those are the two upside thresholds, and then basically, it’s Katie bar the door for a couple of hundred dollar moves beyond that. That has been the nature of this cycle when you look at the charts on a logarithmic scale. You have to think of it in percentage terms, or semi-log scale type terms. In my view, I think there is still a good possibility we see something like 2200 or 2300 before the end of this year. We are in the 4th quarter of the year already. I think we are that close to a significant change in character.
David: We have an interesting mirror, then, because on the one hand we have a cyclical bear emerging in the equity market in the context of a larger secular bear market. The flip side is, within the gold space, a secular bull market and now a cyclical upturn within that larger context. One of the comments that you made earlier was that the downturns, cyclical bear markets, in the context of a secular bear market, tend to be exaggerated. Is there any similar characteristic in terms of the opposite?
Ian: In the secular uptrend that gold is in, the corrections tend to be short and sweet. You will get sharp volatility, but they tend to be over pretty quickly. The correction that we just had, for example, ran for a year, and then I would expect it to run a minimum of 12, 18, possibly 24 months on the high side, depending on the nature of the advance. If it is an orderly advance, like it is going up a staircase, that becomes a sustainable rate of trend, as opposed to something that makes moonshot kind of moves, where it spurts up to 109, goes back 50, then up 100, or up 200, that kind of thing, that becomes less sustainable.
I am expecting to see a fairly orderly, stair-step movement, pretty much as we saw on the last cycle, once we broke through the $1050 level, it was a pretty orderly progression up to $1450. It got a little more accelerated after that, but I am looking for that more orderly kind of an advance initially. Every time I hear people talk about this being some sort of a top in gold, or that the gold rush is over, I just burst out laughing, because they haven’t even seen the beginning of a gold rush. I speak at conferences all over the place, and they all want to talk about gold, and then you ask them how many own it, and about 5% of the hands go up. At the end of the day they will be beating down the door to get more of it.
David: When you look at year-end potentially being $2200, $2300, what is that slated to look like in 2013, 2014, on an orderly basis, not a rate of change exceeding 100-150%, but the stair-step that you were describing?
Ian: I don’t know that I would want to put a percentage term on it, but we are probably going to see something on the order of 10-12%. I am trying to look at the relative level of debt creation around the world and, similarly, the patience levels of the major holders of fiat paper, and those major holders, I think, increasingly, are going to actually end up calling the tune. China, by itself, has got in excess of 3 trillion dollars worth of paper, Russia has 500 billion, India has 300 billion, Taiwan has 400, Saudi Arabia has 600. That’s a lot of billions. And they don’t own a great deal of gold.
I made the comment much earlier on about the present period being comparable to 1971. As these emerging countries that have accumulated these extensive foreign exchange reserves watch the ECB, the Bank of England, and the Fed layering debt on top of debt on top of debt, they are just basically debauching the purchasing power of the paper that they hold. At one point there is going to be a disagreement, where China is going to end up saying, “Okay, we’ve had enough.”
There is going to be some policy move, whether it is over the islands in the South China Sea, I don’t know. Whether Israel does something with Iran is a risk that worries me, and the alienation of the entire Arab world, or the Muslim world. It concerns me that we may see higher oil prices, not driven by demand for oil, but driven by concern for the credibility of the dollar, because that is what really was attacked in 1971.
I think we are coming into a period that could be likened to that, and it will be external holders of those dollars that call the tune, and they will be saying, “Okay, we’ve have enough, we are going to convert our dollars into gold, and not just gold, but copper and other tangible assets around the world.” China has been doing a lot of that, I would say, on a quiet basis, rather than on a provocative basis, because they don’t want to provoke Congress into going protectionist, but we know that in periods of serious economic distress, then protectionism naturally rises in all of the industrialized countries, and nobody wins if we go protectionist, because then global trade contracts at an even greater rate. The foreign holders of paper are the ones that are going to call the tune.
David: The proof is, certainly, in the foreign exchange reserve holdings where the developed world countries own a lot of gold already, but don’t have a lot in terms of foreign exchange reserves that is new and just sitting there in fiat currency. The emerging markets, on the other hand, have, on average, about 4% of an allocation to gold, and have plenty of buying power in terms of liquid capital, as you mentioned, the Chinese at the top of the heap with close to 3 trillion.
Ian: Yes. I publish a table that I refer to in a lot of my talks. Out of the 15 emerging countries, one of the points to illustrate is that, collectively, they have about 7 trillion dollars of paper that is largely denominated in dollars and euro. A key point is that number has doubled since all of the bailouts started in 2007, so they have created all of these trillions of pieces of paper. Somehow or other, close to 4 trillion of it has ended up in the hands of these emerging countries. They think it is an asset. They are carrying it on their books as an asset, but if the Federal Reserve, the ECB, and the Bank of England are deliberately undermining its purchasing power, they are going to come to a point where they are going to say that they would rather own something else.
David: We have certainly seen a lot of central bank buying, going back to 2009, the pre-2009 period being net liquidations, the characteristic of central bank activity in the gold space, and from that point forward, net purchases they are adding to, we are seeing this happen already.
Ian: It has been happening. The most dramatic of all was the IMF auction back in 2009 where the IMF finally got the approval of the various members to auction off or to sell 400 tons of gold, and the Indians stepped right up and bought 200 tons of it at the equivalent of $1045 an ounce. The reason I remember that number so well is that it coincided with a headline in Barron’s saying that gold was still a lousy investment. I published a chart showing that gold had just broken through $1000 and it was the most exciting moment you could ask for and Barron’s had this negative headline.
But it was the Indian purchase of 200 tons, and then the IMF. I am aware that they were approached by some private investors about buying the other 200 tons and they were terrified of the idea of being seen to sell it to private investors. So instead, they leaked it into the market in smaller installments later. One of the ironies of that particular IMF auction this past weekend, the IMF finally has come out with a comment that they are going to allocate up to 1 billion of those proceeds to help out the third world countries, and they referred to the money as being the windfall gain that they made on their gold.
David: At $1045?
Ian: Yes. By selling it at $1045. (laughter)
David: That is like the British talking about a windfall from unlocking a debt asset at $252 or $260 dollars an ounce.
Ian: (laughter) The so-called Brown bottom in gold back in 1999-2001.
David: There has been massive interest in gold ETFs. The rate of increase in interest there – we are nearing peaks, if not new peaks, in the consumption of gold via ETFs – is that because many in the investor community are concerned about COMEX behavior and the results of MF Global, that they don’t want a leveraged contract position?
Ian: I think that has been a very big part of it – MF Global, and then the failure of PFG Best, and there was another one, the Sentinel fiasco from a couple of years earlier. I think COMEX has severely damaged its credibility, with the comingling of client funds with house assets for their own trading accounts. That scared a lot of serious money away from COMEX. I used to tell people on a regular basis that you own COMEX contracts and fully secure them with Treasury bills so that you can collect interest on it if you are a large enough account, and that became the easiest and cheapest way to own gold.
But the way things have unfolded with COMEX and the CFTC in recent years, I think you would be crazy to leave it in the hands of a CFTC registered firm or COMEX firm. That is really what has led to, I think, the evolution of the ETF. With the central fund of Canada back in 1983 we created the original stock exchange tradable bullion proxy that for most of that history was a physical mix of 50 ounces of silver for each 1 ounce of gold. In the later years, we also created Central Gold Trust, which was gold only, and they both trade on the New York Stock Exchange.
But the distinction there was that they were Canadian entities, which could qualify them for capital gains tax treatment under some of the U.S. tax law, which became an attractor. But subsequently, the velocity of trading – the trading liquidity of GLD and IAU – is such that a great many of the young, aggressive managers today just want to trade those instruments that have the greatest trading liquidity and we now have computers that are robo-trading in the GLD. That’s where a lot of its volume comes from.
But at the same time, if you want to commit a substantial amount of money into gold with having a minimal market impact, GLD has been the way for traders to go, and they also have, apparently, very attractive options markets going on, as well, so GLD has become a marvelous trading mechanism for those who want to trade gold. I am not convinced it is the best way to hold gold for a longer period of time, because I think the costs are too high. But from a trader’s point of view, there is no question that the ETFs have attracted a significant flow of gold.
David: Let’s make sure and not neglect silver in this conversation, because clearly, when you go back to CEF and the original component parts, a 50-to-1 allocation, 50 ounces of silver to 1 ounce of gold, what you have done is open the conversation to what the ratio is currently, which is right on 50-to-1. It has been higher than that at a range of 60-100, and even lower in the last 18-24 months, reaching a low of about 31-to-1. What does the course ahead look like, and how would you look at silver as an addition to a metals portfolio? It’s not 60 or 70-to-1. Should it not be paid attention to at these levels, or with history in mind? How would you frame the context?
Ian: I have done a lot of historical work on the silver-gold ratio because, in essence, when you have a heated up gold market, then silver becomes gold on steroids, people revert to its monetary history, even though it doesn’t really have an official monetary role any longer. But I still think that it trades on its monetary history and in essence from 1984 to last year, it had been locked in a broad range that was, I would say, roughly 45-to-1, silver was rich relative to gold, and anything over 80-to-1, silver was cheap relative to gold.
On that run to $50 that we had back in 2011, it got to about 30-to-1 on the futures, and in my view, as a technician, that breakout occurred at around the 60-to-1 level, so I have been working on the hypothesis that last year’s move probably broke it out of that old 45-80 range, and may have set up a new range going forward, at which we may see 30-to-1 as an extreme, where silver is ahead of gold, or 60-to-1 where silver is cheap relative to gold.
On the recent correction period when the prices were lower, we were in the 55-56 area, which is where I started to really feel the 55-60 ratio was going to be a good opportunity entry level for the silver market. If you go back prior to 1984, when silver-gold was 45-to-1, silver was cheap relative to gold, and at the extremes it was as little as 15-to-1. Eric Sprott, who has been a promoter of a couple of the large new ETFs in recent years, keeps talking about it going back to 15-to-1.
I am not anxious to see that happen because when it has happened in the past, it has been very sharp and very brief, and I’m not a big fan of looking for moonshot kinds of things that might be the end of a cycle kind of move. But I would recognize that it is entirely possible we may see 15-to-1 at some point in the much later stages of this cycle. For now, though, I’m working on a practical range of 60-to-1 silver is cheap, 30-to-1 silver is probably a little rich.
Kevin: David, I love the concept that Ian McAvity is talking about, because it is something we have used here for decades. It is what we call compounding ounces, and of course, what that means is when silver is favored over gold you go a little bit more silver, and then when silver does its thing relative to gold, you go a little bit more gold, and over time, without having to add any new paper money, you have an ounce by ounce gain in the portfolio. It compounds the ounces.
David: There is a certain degree of pragmatism and positivity that we bring in to a precious metals portfolio, not just a question of us owning gold because it’s a fear play. We favor the value play. That is really what you are looking at on the ratio between gold and silver. You are always favoring the ratio, or making sure that you recognize it. Even if you have a greater preference for gold as the dominant position in your portfolio, you should recognize the value, and certainly participate at that level.
Kevin: David, this is not just an application to gold and silver. You can use this ratio with gold and real estate, you can use the ratio with gold and whatever you want to. In fact, the Dow-to-gold ratio has been an incredibly helpful tool to know when to stock up on the gold, let it grow, but then also exercise an exit strategy for some of that gold when it hits the right ratio.
David: Sure. Secular trends are not necessarily predicated simply on price. It is a relationship to other assets and that is where that is particularly helpful. We will include that in our conversation with Ian McAvity next week as he joins us again on the McAlvany Weekly Commentary.