GSCI/S&P500 ratio: equities expensive, commodities cheap?

Discussion in 'Strategy Building' started by Error Correction Funder, Mar 31, 2018.

  1. [​IMG]
     
    Maverick1 likes this.
  2. It looks like the quickest adjustments to this ratio is when stocks fall. This may imply stocks are expensive. A lot depends on how the current trade friction resolves and what happens to the yield curve this year.
     
  3. ECF, love these posts of yours that always provide interesting data to get one thinking! Did a quick search for commodies funds/ETFs and they have seemingly all been negative recently. Seems with inflation likely coming at some point now might be a good time to buy come commodities! Dont suppose you have any preferred vehicles? Thanks!
     
  4. Happy you like them. It's good to be aware of anomalies.

    I interpret that graph differently. Since the formula is commodity prices / stock prices, that means high values are when commodities are overvalued, and low values are when stocks are overvalued.

    The lacking narratives at the extremes almost fully bear that out. Add the recognition that the first major low was right after Go-Go and the present low coincides with record stock valuations, naively, one should short stocks and long commodities.

    I don't think that's a good play either, on the commodities side of the equation.
     
  5. clacy

    clacy

    This is definitely worth watching, IMO. I am seeing signs of inflation ramping up in my business.
     
  6. Are you supplying less units?
     
  7. clacy

    clacy


    No, our input costs are going up and operating profits going down in the past year.
     
  8. What happens when you try to raise customer prices?
     
  9. clacy

    clacy


    We have been raising our prices but we're not able to raise them to the end user as aggressively as our input costs are rising.

    For the past 1-2 years, labor expenses have been rising much faster than our pricing to the end user. At a certain point, hopefully household wages have risen enough for us to pass on more aggressive price increases.
     
  10. Would you say this more or less accurately describes your profit margins without depreciation? https://fred.stlouisfed.org/graph/?g=jiC5
     
    #10     Apr 1, 2018