On Worldwide Exchange (CNBC) this AM, Martin Hennecke of Tysch told CNBC reporters that he felt gold was a buy at this level. He thought that inflation was not being measured as it was back in the late 70’s and that were Gold adjusted for inflation per the measurement then, gold would be not $2300, rather over $6,000. His target was $10,000. He actually told the reporter the reason inflation was not measured as it used to be. He said it was because the central banks did not want folks to see the higher inflation nor to invest in gold as an alternative to the stock market and bonds.

Kudlow and Company still don’t get it. They are getting closer. Last night Mr. Kudlow showed the gold chart from 1982. He failed to superimpose the Dow chart over it. Had he done so he would have seen how gold appears to be headed for $8,000 and the Dow headed for the same… Until the last few days it was somewhat unclear, imo, whether gold would reach the higher level of Dow 13,000 or the Dow would come down to meet gold at around $8,000. As you recall, the Dow v Gold chart has shown 3 times or more in 132 years that the ratio of the two came to within a 2:1 (Dow:Gold) ratio. The last time (1982) it came close to 1:1. I feel it will exceed that this time, but not certain by how much. This reduction of the ratio to 1:1 is a very steep curve, one that we appear to be on the right side of the slope. Steep in the sense that it is a quick dive, not a slide. Perhaps this explains the macro events that just keep on coming without end to help spur along this chart.

Most TV pundits have not come to terms with the idea of the US dollar as the world’s reserve currency is currently doing a hand off to the Euro. As such they try to explain current financial events from their historical perspective. Trouble is there isn’t one. The US dollar has enjoyed the reserve status from at least just after WWII — perhaps earlier. The currency with the status of world reserve currency enjoys oil being paid for in that currency. As we (dollar) rolls out of this status, obviously, then, the Euro rolls into it and as such more and more countries begin to accumulate Euros and offload dollars. This explains the increase in news reports of countries increasing Euro reserves and decreasing dollar reserves. In addition, it explains the recent phenomena of Sovereign Wealth funds trying to find a home for their excess dollars — since they can not spend it on oil.