Real money vs Casino chips

This is a story about a casino - a very busy casino. So successful was this casino, that most of its patrons never needed to leave. They ate at the casino's restaurants, and they slept in the casino's hotels. They even brought up their kids in the casino (they went to school there!).

Because they almost never left the casino, the patrons hardly ever used real money.  They paid their food and rent bills with the casino's "chips" (ie, the high tech plastic tokens used for gaming machines, poker tables, and all other casino services). Very convenient.

In fact, the tokens were so convenient that patron rarely cashed in their chips for real money.  So infrequent were the patron's trips to the cashier, that one day the casino decided to shut their cashier down altogether.

Well, the patrons realized that this meant that they would be trapped in the casino, as all their chips - and some patrons has amassed quite a hoard - could never be wagered or spent outside the casino.

So the patrons started heading for the exit, (which took some finding mind you - it was well hidden), as they thought that the casino would eventually go bust if it wouldn't redeem patron chips for real money, and if the casino did go bust, everyone's chips would become worthless.

Without patrons, the casino could not survive, so it had to do something to stop the exodus.  The casino played the only card that it could. It reset all the games and machines to pay out big. Some paid out as much as 20% each time you played.

It worked!  The exodus stopped, and the patrons returned to the gaming machines.  With the casino paying out so much, they wagered much more than before.

Over time, two things happened..

KWN Turk Gold Charts

There is an article over in King World News called The Most Important and Extraordinary Chart for 2012. Here's the chart:

Turk argues that Gold Stocks are cheap relative Gold, based on the above chart.

I disagree, and here's why.

Price Earnings Ratio

The Price Earnings (P/E) Ratio is a well known and easily computed number regarding the value of a company.  Yet, it's really not that well understood.  What exactly does a P/E of 14 indicate?  Is it better, or worse than a P/E of 16?

The way I see it, there are two main components that make up the P/E ratio, and they are not price and earnings - well, they are - but, if you slice it another way then you get two more revealing components.