With the Dow continuing its steady climb into September, economists are giddy with enthusiasm as they usher forth a stream of emotional pontification throughout the news media. Calls for a new bull market and an end to the recession are increasing with the rising levels of optimism (see: MarketWatch). How anyone can be bullish on stocks despite the innumerable economic warning signs is beyond my comprehension.

The recent figures in the Daily Sentiment Index reporting that traders are 89-90% bullish is a testament to human emotion as a market mover and the efficacy of state-run propaganda. Do economists really believe in the power of green shoots? Incidentally, the college term “green shoot” represents a different kind of stimulus. Maybe that explains it.

But one man’s bull market is another man’s gilded rally, as the mania always peaks at the end.

This mania has been especially intriguing to observe among gold bugs, presently vindicated by gold’s heroic push into four-figure territory. Some claim gold is “finally” on the verge of breaking out, as though the yellow metal hasn’t spent the entire decade breaking out.

But the dollar price of gold, while important, is only a secondary consideration to its value against all other assets, hence the reason that many, like me, favor a strong gold position in a deflationary or hyperinflationary environment. Since gold is true money, and intrinsically, fiat currency is hardly worth the paper it is written on, then the value of assets in terms of gold is a better barometer of gold’s performance than its price in dollars. While gold’s push above $1,000 has been exciting for many, it is worth noting, as a rudimentary comparison, that gold has actually lost ground to the Dow in the last six months.

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