Richard Russell Part III
<But something else is taking place. The chart below shows gold vs. silver. We see that in June 2003 gold rose to the point where one ounce of gold would buy 82 ounces of silver. The was the peak of gold strength vs. silver. But from there the trend has been irregularly down toward stronger silver. The latest vertical column shows a line of "O"s breaking below the preceding vertical column. This indicates that silver's relative strength against gold is increasing. The latest box is at 73.5, meaning that one ounce of gold will now buy 73.5 ounces of silver.
Over the last 200 years the average ratio has been that one ounce of gold will buy 31.34 ounces of silver. Silver has done best (compared with gold) during periods of monetary stress. At such times, silver becomes a monetary metal rather than an industrial metal.
To boil it down to simplicity, what all this means is that gold is in a primary bull trend as is silver, but silver is "too cheap" compared with gold. For this reason, I'm suggesting that subscribers who own no silver stocks take a position in a few of the following -- PAAS, SSRI, CDE, SIL, HL. Many subscribers may want to take an equal dollar position in each.
The constant question that I receive is -- "The shares of gold and silver stocks have been on a tear. Should I wait for a correction before buying any gold and silver stocks or before adding more to what I've already bought?
And my lousy answer is that I honestly don't know -- and neither does anyone else. This is a "stealth" bull market in the precious metals. The average investor doesn't have a clue as to what's going on, and most institutions have no positions in the precious metals. This makes timing extremely difficult. Here we have a gathering fundamental situation, and nobody knows that's happening and -- nobody's in gold and silver.
Let's go over a few statistics. The world's bond markets are valued at well over $33 trillion. The US stock market is valued at around $12 trillion. The M-3 money supply in the US is about $8.8 trillion. That's a total of around $55 trillion. I've heard that there's around $8 to $9 trillion floating around outside the US. That takes the total to around $64 trillion of a fiat US currency.
Against that all the gold ever produced since the beginning of time is estimated at $1.8 trillion at current prices. The estimate for all the world's gold stocks taken together is around $140 billion. So we have around $1.9 trillion as a value of the entire gold universe (metal and stocks) as against around $64 trillion in paper money sloshing around the world. And I'm not even talking about world debt, which would be out in space.
Another interesting comparison is that the market cap of Microsoft is around $274 billion. This is about double the value of all the entire gold mining industry. Conclusion -- gold stocks are cheap, and gold is cheap -- and there are one hell of a lot of fiat dollars floating around.
Furthermore, the world monetary system based on non-intrinsic currency is beginning, just beginning -- to sputter.
Under the above circumstance, how am I or anyone else to know at what point to buy more gold or gold and silver stocks? Technical analysis, cycles, RSI, momentum, stochastics, algorithms, over-bought and over-sold methods? FORGET THEM. I doubt they're going to work at this point.
Look, just four months ago I recommended, among other things, that my subscribers buy a group of six low-priced gold and silver stocks. I include the list, updated below.
The group is up 132% since late July. Did anyone believe that this was going to happen? Did I? All I knew was that the precious metals were in a new bull market, and in a new bull market you close your eyes and you buy -- you take your position.
We're in the same situation now. We're still in the early or accumulation phase of the gold and silver bull market. I can't tell you when to buy and neither can any other so-called precious metals "expert." You take your position, and you add during corrections. What, the damn stocks aren't correcting? Sorry, they don't run the markets for Richard Russell or his subscribers. Then you take your chances and you buy.
But one thing is for "dang sure," as they say in the South, where my daddy came from. It's a bull market in precious metals, and so far, most of the world either doesn't understand it, doesn't recognize it, and even rants against it.
As an interesting aside, the November 27 New York Times included an article on gold. A few quotes -- "Even Ian MacDonald, manger for precious metals at the New York branch of Commerzbank and a bear on gold for 15 years, said, 'The scary things is we don't know how high this price can go.' " Another quote -- "An analyst at a big hedge fund, who insisted that he not be quoted by name, put the argument bluntly, 'I don't think supply and demand matter,' he said. 'What matters is the esteem people have for the paper money and what we are seeing here is a flight to hard assets -- gold.' "
What I thought so interesting is that this fellow above wouldn't give his name. Why? Because rising gold is an affront and a threat to the whole Central Bank system and its production of paper money. And this guy thought he could be in trouble if he even hinted that gold was preferable to paper money!
Gold stocks that I like here are AU, ASA GLG, GG, NEM, PDG, GSS, RANGY, RGLD,
I'm thinking that it should be an interesting and maybe even an exciting week ahead. And as they say 25 miles south of La Jolla in Mexico, Via con Dios -- "Go with God."
Signing off for the weekend, I am your good friend --
Russell
From headlines in today's New York Times, "Apartment Glut Forces Owners to Cut Rents in Much of US." Russell comment -- When it's increasingly more advantageous to rent than to own, it's a sign that housing is too expensive.
Yesterday, the euro temporarily topped 1.20, its highest level against the dollar so far. The battle of competitive devaluations is heating up. In the end all paper will lose against hard assets, particularly gold and silver.>
New highs struck for gold and silver stocks last Wednesday -- PAAS, ABX, CDE, GSS, GLG, KGC, CVJ, SSRI, NEM, GG, AU, PDG, FCX.> |
