Some snippets from Richard Russell today
<July 23, 2003 -- There's a lot happening these days, but most of it is not being covered in your local newspaper. The reason it's not being emphasized is that a good deal of what's happening is occurring in that most mysterious and yet fundamental area of the economy. I'm talking about the area of money.
At this point, almost every nation on earth is trying to push or talk its currency down. Europe is not in good shape, and the talk there is of the European central bank on the verge of lowering its interest rate. Germany and France are in or near recession, and Italy is joining them. In Asia the situation is very difficult, since every Asian nation is now competing with China for exports.
The Chinese renminbi and the Malaysian ringitt are pegged to the dollar and protected by capital accounts. The Hong Kong dollar is also tied to the greenback via a currency board. All the other Asia currencies float, but their central banks have been intervening on a huge scale in an attempt to hold down their currencies, particularly since the dollar has weakened.
So the big battle on the part of almost every nation is -- "How do we keep our currencies weak against the dollar and against every other currency? The answer, and I've been predicting this for quite some time is -- COMPETITIVE CURRENCY DEVALUATIONS. "Begger thy neighbor" is the new trend in currencies.
This presents an ideal background for real money -- gold. And for gold's "little sister" -- silver. The precious metals are in a most interesting position. Think about it -- here's the Fed, printing $150 billion of BS paper in six weeks. That's enough junk paper to buy the entire gold industry and have roughly $50 billion left over. What that means to me is that gold shares are "dirt cheap," and so is their product -- the yellow metal, gold.
In investing, occasionally, great value-opportunities present themselves. In 1942 the Dow sold as low as 92, at a time when it looked as though the Allies could lose the war to Nazi Germany. I saw another such great opportunity in 1949 when the Dow sold as low as 161, during a time when everyone thought we were on the edge of a second Great Depression. In 1974 the Dow sunk to 577, presenting a third historic buy opportunity for investors and readers of Dow Theory Letters.
And I wonder here in 2003, whether gold (and possibly silver and even platinum) aren't presenting us with another great buying opportunity in an item that is totally out of favor with investors?
But this time the item in question is even more fundamental than are stocks. This time the out-of-favor item is far more emotionally charged than stocks. Veteran readers of these report remember the late 1970's when I would write repeatedly that "There's no fever like gold fever."
I believe we'll live to hear that same phrase again -- but probably not until gold has moved into its third psychological phase. The third phase of a bull market is the phase that sees the public rush into the market as they finally buy with total abandon.
By my reckoning, we are still in the first psychological phase of the gold bull market. This is the phase where informed investors quietly accumulate the desired item. These investors are in no hurry, and they are not interested in "bulling" their acquisitions. These early investors want time to accumulate, and they want as little public recognition and competition as possible.
In the second phase of a bull market, the item rises as smart fund managers and professionals begin to see the picture, and they too join in the buying. In the second phase the best-informed members of the public may also join in the bull market, and here the item begins to accelerate to the upside......
Probably the most dramatic change has been the collapse in daily new highs on the NYSE. I've been talking about the many 'buying climaxes" that we've been seeing each week. A buying climax occurs when a stock rallies to a new 52-week high, but then closes DOWN for the week........
The precious metals had a good day, to say the least. August gold was up 8.00 to 358.70. That put gold above both its moving averages and in a clear "buy" mode. A bigger surprise was Sept. silver up a whopping 28 cents to 5.07. Silver now above both its moving averages and in a clear bullish mode.
One ounce of gold now buys 70.7 ounces of silver. Silver is ridiculously cheap against gold, against the Dow or anything else and is priced about like good potting soil. Today's action felt like frantic short covering, and there are still a lot of silver shorts out there...........
hate to repeat it, but if you're trading, if you keep moving in and out of the gold shares, you're very likely to miss the big moves. In the early stages of a bull market, you buy the stocks, and add to your positions on the reactions. This is what I've advised my subscribers to do with the gold shares. Otherwise, you try to grab the little profits, but you end up being out of the real primary moves.
In a bull market you buy 'em, you own 'em, and you sit with 'em. Then you make money by doing nothing.> |
