Check out the platinum/gold ratio.
Successful speculation is about finding extremes and betting against them. For instance, Chinese stocks were extremely expensive in late 2007. The euro was extremely overvalued in 2008. Commercial real estate was extremely popular in 2007. We wrote about each of these "extreme" situations... and each was crushed soon after.
The extreme effect is why we're interested in our colleague Jeff Clark's "buy" recommendation on platinum right now. Gold and platinum are both precious metals... so they typically trade in a "band" together. One ounce of platinum usually buys two ounces of gold. Right now, that band is stretched to an incredible multiyear extreme. Platinum is super cheap.The auto industry uses platinum to make catalytic converters... so the recession sent the price of platinum from $2,200 an ounce to $800 in 2008. This huge fall has caused the platinum/gold ratio to reach "extreme" levels. Adapted from Brian Hunt's Market Notes
Spot gold price USD 943 /oz
Gold Maple Leaf (GML) USD 983
UOB selling GML at RM 3,531
MBB selling Kijang at RM 3,601