Stocks are now more expensive than ever versus commodities…
What does all this mean? One of two mutually exclusive things:
1) In the past, when stocks have gotten anywhere near their current valuation levels they have subsequently crashed. So if history still matters, look out below in 2021.
2) If we’ve entered a new, hyperinflationary world where governments and central banks try to inflate their way out of their past mistakes without regard for the impact on price levels or currency values, then stocks might continue to rise in nominal terms while falling in inflation-adjusted terms. In other words, we become a banana republic. Gold, in this scenario, will rise faster than equities so it’s still possible to make money shorting, but only in a pair trade coupled with long gold positions.
