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Sunday, June 05, 2011

Dow/Gold Ratio: How To Compete In An Economic Downturn | STRATEGIC BUSINESS AND MARKET TRENDS

RD Watkins
Strategic Business and Market Trends with RD Watkins

The US Dollar based Dow Jones is like a child’s top in its final vacillations it gets ready to tumble. The affect of the Federal Reserve Policies on the true value of the US Dollar and the US stock market can be clearly seen in the Dow/Gold ratio. The question is, if you are an entrepreneur interested in creating value in the US markets or your businesses valued in the USD and wanting to be paid for that value, what strategy can be employed? The answer is going to be hard to generalize but, I believe it is incumbent on all of us to ask the question and apply some thought to it before our ability and opportunity to execute the strategy vanishes.
Chart courtesy of

Let’s go backward in time to see what happened in each of the swing/vacillation instances of the past and what affects it had on entrepreneurs and emerging enterprises of the past. The Fed policy first exhibited this wobbling top-like effect on the Dow/gold ratio as it was coming out of the depression. Gold values skyrocketed as scared money ran towards stable valuation and away from speculation and the funding of risk and the businesses in the growth cycle. This shrank the power of American industry and the result was an anemic rate of job growth and rising unemployment. The catalyst for eventually returning to a state of growth was WWII and the demands placed on industry to deliver the tools of war funded by government purchases.

The next occurrence of a burst bubble is the 1970s with the oil crisis as its catalyst. Notice that war again might have been construed as the response (called a remedy by politicians) which should have brought the growth machine back online. The secondary response was the raising of interest rates, via Fed policy to what historically were astronomical heights. This forced stabilization and when co-joined with a more business friendly economic and regulatory policy resulted in relatively steady growth until reaching a peak in the 2000's.

Our latest wobbly response from the Fed has been dropping the interest rates, dollar printing (called devaluation or monetization) and denial of the inflation that each entrepreneur feels when he must raise prices to his end costumer or cut salaries and personnel on the production or R&D side of his fiscal house.

The Solution is Entrepreneurship & Relationships:

The solution is always Entrepreneurship; the encouragement of prudent risk taking and investment in people, things and products needed and sought after during these downswings. Read the history of your industry, extrapolate and plan based on strategies that have working to re-power the economic engine in the past and be enthusiastic and motivated in all you do in and for your business. These will be the key differentiators in downswings.

All businesses that drop to their knees and succumb to competing on price alone are destined for a hard road ahead. Those that are attentive to their customers and clients needs, understanding their plight and give hope rather than retreat into their shells will become the guiding beacons and positive harbingers of the growth soon to come. You will magnetize yourself and your business if you have an understanding that all stable businesses are built on relationships and the intangible values inherent in what boils down to commerce by exchange of value. If that value is represented in Dow stocks, Gold, Dollars or chicken eggs it makes no difference. Your customers will seek you out if you can give them the dependability and stability their lives are lacking in addition to the transaction value. Always concentrate of the needs of people and you will do well in your business.
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RD Watkins brings value and builds productive and collaborative relationships by "Applying Common Sense Project Management Principles in a Virtual World". He fills the role of Senior Project Manager, is a PMI certified PMP® (Project Management Professional) and holds CompTIA IT Project+™ credentials. You can connect with RD to discuss his capabilities in cost effectively managing and enhancing productive consensus on your virtual projects through his profile at or contact him via email at

For more information, please visit RD's TNNWC Bio.

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