What Is A Wealth Cycle? The Difference Between Price & Value Explained by Mike Maloney

by birtanpublished on September 9, 2020

What is a wealth cycle and you know there's only so many different asset classes and I've picked the three major ones here paper assets like stocks and bonds real estate and commodities which include precious metals but precious metals are a little bit different than

The rate than the rest of the commodities because they're also money so they're a safe-haven asset in times of crisis so there are some times when commodities can be going down but precious metals go up but if investors

Are rushing from one asset from other asset classes into one asset class pushing this asset class into a bubble shouldn't it be drawing currency away from the ones they're selling and shouldn't those fall yes I mean it

Should except we live in a world where they're constantly creating currency and everybody is getting a little bit of this currency and so instead of the things that are being undervalued

Falling they either go sideways or they increase just a little bit as the one asset class is going into a bubble because of all of this currency creation and so this is based on a real-world example it's just a very simple diagram

But this is from the 70s if gold is going up and if stocks or real estate it was both stocks and real estate in the 70s but I'm using stocks here because I'll show you the actual chart of that later if gold is going up at a much

Faster rate and it did during the 70s stocks rose a little bit but basically they were sort of bouncing along sideways and going up a little if you were invested in gold when you sold 10 years later you could buy many many many

Times more stock if you were invested in stocks when you sold you could only buy a fraction of the amount of gold that you could have had you just invested in gold in the first place or conversely just a spinet on food gasoline you know

Your house payment a new car whatever stocks did not keep up with them with inflation during that period of but then one asset becomes too overvalued the other one becomes too undervalued and the cycle reverses and

It did for 20 years gold went down from 1980 to the year 2000 and stocks entered a bull market that was one of the greatest stock bull markets in history from 1980 until the year 2000 with the blow off top of the tech bubble and then

It reversed again and we're about halfway through this cycle right now and what's happening here is they're printing currency right at about this rate in the middle so this is the investors rushing back and forth from

One asset class to another but the one that's underperforming doesn't actually go down because they keep on printing all of this currency now if you take one asset class and divide it from by the other asset class and it doesn't matter

Which way which direction you do this you can take gold / shares of the Dow or the Dow the price of the Dow Jones Industrial Average or S&P 500 / gold or your house / gold or Bush's a wheat or tons of iron or barrels of oil or shares

Of the Dow and what you discover is that everything is trapped in what I call a valuation range and you can be invested for sin in one thing for a very very long time and end up nowhere but if you can measure when something is overvalued

And and something else is undervalued and you can see that because you have to measure it to be able to see it you can't see when something's overvalued or undervalued in this monetary system that's constantly expanding and so if

You can see that then you can sell the undervalued asset class sell the overvalued asset class and by the undervalued asset class and it's like busting these cycles apart and pasting the next wave onto the end of the last

One and it is a road to true wealth I'll show you that in a moment now some of the examples I'm going to give here I understand that nobody can catch the exact top of anything and that these are much longer time

Frames than most people's lifetime even however I just want to show you the immense power of this the the types of gains that can be made this is in the 1920s this is a upper-middle class home nice like four bedroom large home with a

Swimming pool in the backyard and a decent amount of land and that's sold for about three thousand dollars in the 1920s and Gold was $20 an ounce back then so it was it was worth it it would have cost $3,000 or 150 ounces of gold

Conversely if you had sold the home you could have gotten a hundred and fifty ounces of gold for it and then in the 30s because of and this is just a few years I mean this could have been 1928 and this is 1932 so it's not very long

That you had to wait the house fell to $2,000 Gold was now $35 an ounce so that meant that this house only cost 60 ounces of gold if you had sold this house for a hundred and fifty and just to come and bought gold and then

Repurchased you could have gotten 2.5 times the amount of real estate in just those few years then in 1970 that house was now $30,000 but gold was still $35 an ounce so it cost 850 ounces of gold so if you had bought this home their 2.5

Times more real estate in the 30s and then in the 70s sold for when it was $30,000 eight hundred and fifty ounces of gold you would have received twenty one hundred and twenty five ounces of gold then just a decade later because of

Rampant inflation the house was now sixty thousand dollars but gold became free trading in 1971 and it went from $35 an ounce up to 850 so that house was now worth 70 ounces of gold it went down from 850 down

To 70 during that period of time so if you repurchased real estate with your 20 125 ounces worth of gold you would have now gotten 30 of the same type of home that you sold in 1920 you would now own 30 of them and then in the year 2000

Gold bottoms at 250 dollars that house was now worth $200,000 same house the house hasn't changed it's two hundred thousand dollars but gold had gone down so it now cost 800 ounces and so if you sold the house in the year 2000 you

Would have received twenty four thousand ounces of gold then in 2011 gold hit nineteen hundred and twenty five dollars an ounce and the house was now worth three hundred thousand dollars but it was only worth a hundred and fifty

Ounces of gold so you could have in in 2011 bought a hundred and sixty homes with the proceeds from taking this one home and just going back and forth to different asset classes a hundred and sixty homes however this cycle isn't

Done yet this is you'll see later in the Dow gold ratio Gold's price went from thirty five to two hundred from 71 to 74 and then it went back to 100 to late 76 and then it took off and went to hate fifty we're basically in that mid cycle

Correction now and it's pretty much over with and so now we get to see the fireworks of the end of this cycle I don't know when the end is going to be I don't know if it's going to be twenty nineteen Twenty twenty Twenty twenty one

Twenty two could be Twenty twenty three but what I what I'm fairly confident in is that that house is on measure did you know it could be thirty thousand dollars measured in u.s. dollars if we have if we're still fighting deflation then we

Don't have any big inflation if but it could also be three million dollars if the if the Federal Reserve is fighting deflation they just print and print and print and it keeps on going into real estate and the stock market

But either way it's pre-measured in gold it's probably going to be somewhere around 50 ounces of gold and if it hits 50 ounces of gold that means you could buy 480 homes that are the same home that you started here with in the 20s

It's it's just the same investment just jumping from different asset classes now the gold that you received here makes you were let me see I think that was about 30 million dollars worth of gold if you hang on to it and buy this real

Estate this is about a billion dollars worth of real estate so you have gone from three thousand dollars to a billion dollars that's you know this sounds absurd but these are just numbers this is an exercise on what is a wealth cycle

And how big is its power so this is the maximum power you'd have to have a lot of luck but you can catch quite a bit of this wave just by looking at numbers and making the right decisions now I'm going to show you a real world example of the

Dow Jones Industrial Average this is it measured in points and this is a fairly old chart I'm I didn't it would take several days if not a week to update this presentation to today's prices and everything I'm teaching a concept here

At the end of the presentation I'll give you today's price of gold and I'll tell you where this would be if these charts were going today but when you take this chart that goes back to the year 1900 and when you take it and divide the

Points on the Dow which are basically determined by the dollar value of the underlying stocks so call points dollars take the points on the Dow divide them by the price of an ounce of gold and you get the Dow Jones Industrial Average not

Priced in dollars but priced in gold and what you see is that it's it's going nowhere it goes up and down the bubbles are getting bigger because we keep on printing more and more and more fiat currency but there's a

Mean here an average that it goes through it's going to return to that and it's probably going to overshoot and when it does I think that this is one of the greatest opportunities presented to anybody in modern times and I sort of

See this as an inevitability and one thing I do want to say is that if you would purchase to show you that if you ride just one asset class you potentially get nowhere over a lot of your lifetime if you had invested in the

Dow in stocks in 1929 right at the peak of the stock market bubble it would have cost 818 ounces of gold to buy one share as the Dow and if you held on to it for 89 years those stocks and sold them now you could buy 19 ounces of gold your

Return for the whole eighty nine year period was 5.6 percent it's about six 107th per year and you know there were periods during this time when we had raging inflation in other words you didn't go anywhere you were invested

Your entire lifetime and you didn't make a gain so if you take this you can see that there's sort of a cycle here but if you really want to see the cycle this is the Dow measured in priced in gold but if you take gold priced in the Dow you

Get this chart overlay that with the Dow priced in gold and now you can really see a cycle I mean that is just a perfect cycle that you can jump in and out of but you only have to make a few decisions in your entire lifetime to be

An immense winner if you had invested if yeah if you're invested in stocks and you ride them up and sell and buy gold and measure to see when gold is getting overvalued and stocks are undervalued again go back into stocks and then back

Into gold and then back into stocks and back into gold if you had invested back here just $30 in stocks and did this technique thirty dollars would have become fifteen million dollars from just thirty now

This again is almost impossible to catch the exact peak and the exact bottom of everything and to have perfect timing but it just shows you the immense power of this and if you only catch one or two of these in your lifetime there's still

Immense gains that you can make and you're escaping that valuation channel that is the most important thing is getting out of that valuation channel and actually going somewhere this the total maximum that you could have

Achieved here is 50 million percent returns that's unheard of now this also would have taken three generations this is more than a hundred years you're talking about 1903 to the year 2018 so that is the end of this portion of the

Presentation the next portion is going to be the everything bubble we're going to update you on where stocks are where real estate is where bonds are so thank you very much for watching this section I hope you really got something from

That because this is the difference between price and value that home went up in price constantly but the value measured in gold went from a hundred and fifty to fifty to eight fifty down to 72 eight hundred so it was bouncing in that

Valuation range that I was talking about learn these things it's a powerful tool we'll see you in the next piece

Related Videos

from daily forex this is chris taking a look at the uh bitcoin market here you can see that we have uh found the market to be bullish we have broken above the ...
James fake revenue at deutsche bank has risen by 47 in the third quarter has this good momentum continued in the fourth quarter as well look we're continuin...
from daily forax this is chris taking a look at the um us stock indices this is the s p 500 and you can see that the s p 500 has uh rallied quite a bit did pul...
The capital position now and the confidence you have to deploy that dividend well indeed we have uh we've had a uh a very strong quarter um in which uh you ...
Hi everyone my name is adita and a few years ago i got divorced and became a single mom of two kids and that's when i started to look for ways to invest my ...
Have you ever thought of the true value of gold I mean really the value of something isn't its price it's what you can buy with it that is the true valu...
Hi this is vlad from effects empire euro dollar failed to settle above the resistance at 1.1870 and is trying to get below the support at 1.1830 if this attempt...
from daily forex this is chris taking a look at the uh crude oil marking cwti has gapped a little bit lower and then basically did nothing so uh at this point ...
Rupert what does this all mean for for equities but in general actually asset classes would you buy right now yeah so we are still broadly constructive on risk ...
Today I'm looking back at the Tesla stock on March 17th I did an analysis based on my ambassador diamond analysis the IDB a and I suggested that after its s...
The thing is if it's a legitimate expense and you are legitimately working from home take it you're literally throwing money leaving money on the table ...
from fx empire this is chris taking a look at the euro dollar and you can see that we are reaching above 118 as new york gets on board and perhaps trying to ma...
from daily forex this is chris taking a look at the euro and the pound you can see the euro has fallen a bit during the trading session here on friday as there...
The crude oil price has had a great recovery off those april lows but it does appear to be struggling over recent weeks so given the resurgence of the coronavir...
The recovery in silver continued into july and in the last week uh the price went somewhat parabolic moving from 19 up to 26 and you can see the sort of volatil...
Now one of the things that almost all millionaires have in common is they have exceptional I mean exceptional communication skills because they recognize that c...
Hi this is vlad from effects empire silver is currently trying to settle above the nearest resistance level at 23.30 if this attempt is successful silver will g...
from daily forex this is chris taking a look at the gold and silver markets you can see gold has smashed into this little short-term downtrend line that i have...
So tell us a bit more about the survey what what are your clients telling you about the lessons learned from this pandemic and what does it tell us about the fu...
At first glance ichimoku charts um can seem somewhat intimidating with a lot going on when we're looking at markets but they're also a really powerful w...