Abstract Painting (809-4) Gives Clapton 21% Annualized Return

There was an article in the Journal today about a painting by Gerhard Richter entitled Abstract Painting (809-4) which sold for $34m, the highest price ever for a living artist's work.  The article mentions that the painting was purchased by Eric Clapton for $3.1m in 2001, which is a 21.2% annualized return.  For comparison, AAPL has given a ~41% annualized return and Gold has returned ~16% per year since then.  The S&P has returned about 1.5% before dividends in the same time.

Total Systemic Debt Measured in Gold

The underlying justification for perpetual QE is that the Fed is trying to inflate away America's sizable debt load by debasing the value of the currency.  While there still has been no nominal deleveraging since 2008, if one measures our debts in terms of Gold, the US owes much less in "real" terms than it did at the turn of the century thanks to dollar debasement.  Whereas total US debt amounted to 70 Billion oz. of Gold in 2000, today it stands at 22 Billion oz. which is a level last seen in 1988.

Of course, nominal GDP measured in ounces of gold would have fallen by a similar amount, hence the Debt to GDP ratio of the US has been unaffected by inflation.  However, this chart should give some indication as to where we are in fighting debt driven deflation with engineered inflation and deeply negative real interest rates.  The chart below may suggest that the threat of deflation is almost over.

Gold Hitting Seasonal Tailwind

Gold is up more than 1% today, which is the first day in a long time that the metal has had notable outperformance relative to the S&P 500.  While gold has moved sideways for most of the year and is only up 4.5% year to date, we are soon entering a time of year that has historically been pretty favorable  for gold bulls.  The favorable seasonality is said to be driven by the Indian harvest/festival season when farmers spend profits on gold.  India was having drought problems of its own earlier this year, but has since seen a nice recovery in rainfall.  Diwali on.

Has Any Asset Ever Had a Longer Streak of Positive Annual Returns Than Gold?

This year, gold bears' favorite statistic is that gold has been up 11 years in a row, but no asset class has ever been up 12 in a row.  How does that compare to the longest winning streaks for other assets?

Below is a chart of the longest winning streaks for gold, housing, bonds and equities as well as some individual stocks.  While gold is currently tied with housing for the most consecutive years of positive returns, neither asset class can beat the string of returns put together by MSFT, KO or WMT, which posted positive returns for 14, 16 and 17 years respectively.  A shareholder of Walmart didn't see a negative annual return between 1977 and 1993!