**Must Read: If Oil Goes to $150, Gold and The S&P Could Meet at $3000.
Bloomberg Report Breakdown
Mike McGlone of Bloomberg Intelligence just put out a report on Gold entitled Gold $3,000, $40 Crude OIl and Typical US Recession.
The report discusses various economic scenarios related to crude oil, the S&P 500, and Gold. In it he explores the potential effects of different economic factors on these assets and their historical correlations.
The question implied that he answers is:
There is a chance Oil can Go to $150. If this happens, and a supply shock causes a recession, what might that look like for Gold and stocks.
That is his base assumption. Before we drill into what he said in it, here’s some important context for readers.
Background:
McGlone’s normal missives are mostly technical and short term correlation-based in content. This time however, he gives a detailed regression study with some convincing corroborating evidence.
The historical precedents he used mostly go back to 1987 with special emphasis on the 2008 oil spike to $147.27. This is interesting in that he did not go back to the 1970s era. If he had, his analysis would likely have gone ballistic for Gold. And in doing so he would also have to change the title from “recession” to “stagflation”.
NO 1970’s COMPARISON
While we do not dismiss the 1970s analog at all, it makes sense to ignore the 1970s in his analysis. Bottom line: This is a good baseline for things if we do "*not* get a 1970s repeat given our current deficit and spending forces.