am trying to discern why the dollar would bounce so much, with our markets melting
there can't be any other explanation other than intervention.
Here's an excerpt from Richard Russell tonight (I hope he doesn't sue me. It's really a plug for him.) This is an incredible piece. I am a little worried about my gold trading position, now decently underwater.
dowtheoryletters.com
What is this primary bear market all about?
I believe it's about world over-production, and I've held that opinion all along. It's about manufacturers and retailers being unable to raise prices -- no it's about manufacturers and retailers not even being able to hold their prices.
Worse, it's about bursting bubbles and price deflation and pressure on debt and about whether banks will continue to extend lines of credit. Today we read in the WSJ that the banks have cut off credit to the Williams Company. I think that headline could be an early peek into the future.
On my computer screen I have lined up, all in a row, MWD (Morgan Stanley), GS (Goldman), C (Citibank), JPM (Morgan) AIG (Amer. Int. Group), FNM (Fannie Mae), MER (Merrill) and NYF (NYSE Financial Index).
These giant financial stocks constitute a "who's who" of the financial structure of this great nation. As I write this morning half and hour after the opening, six of the eight are down, and giant Citicorp is down big time, down 3.69 to 28.35. C is breaking wide open, having gapped down two days in a row.
Back in August of 2000, C was selling at over 58. Since then it has lost over half of its market value. What's going on?
What I believe the collapse in financials is telling us that we're heading into a financial mess in the period ahead. This could be why the utilities stocks have been in a catastrophic free-fall. This could be why yesterday on all three exchanges there was a total of 156 new lows in financial stocks and 50 new lows in utility stocks.
I'm writing this early section of this site an hour after the opening, and lo and behold, with the S&P up 200 points and breadth down by a plurality of 741 stocks -- the Dow is UP 71 points. Could this be manipulation? After all, the Dow Industrials is composed of only 30 stocks and the multiplier is 7. This is the easiest Average and most visible Average to manipulate.
I'm not being a comic when I say that when the Dow is higher the general market declines slowly, and when the Dow is lower the general market declines rapidly.
Gold --I hate to say it, but here's the story as I see it. Deflation is enveloping this nation, and probably the world. The last peg in the deflation story, in my opinion, is the breakdown in gold and gold shares and in silver.
The collapse in the financials is telling me that deflation is beginning to put pressure on the giant debt structure that has been built up in the US.
As I've predicted, the Fed is doing everything it can to offset the forces of deflation. So far the stock market is telling us that the forces of deflation are more powerful than anything the Fed has been able to muster.
I'm wondering whether the Fed might even drop rates again; I'm wondering whether the Fed will start monetizing other debt such as the debt of Fannie Mae or even corporate debt. The Fed has got to be getting desperate. If the forces of deflation really start to accelerate, we face an unmitigated disaster.
Believe me, the Fed would love to see gold moving higher at this point. Higher gold would signify that the Fed was winning the battle to re-inflate the economy. For this reasons, I take today's break in gold as very ominous.
And again, I'm afraid that the action of gold is confirming everything I've been saying about deflation. Falling gold is a dagger in the heart of the Fed's re-inflation efforts.
I have felt that in the face of deflation, the Fed would open the spigots wide in an attempt to re-inflate the economy. I have felt that this action would knock the dollar to its knees and send gold higher, maybe vastly higher as suspicion increases regarding the very viability of the dollar. This was the "insurance" against a dollar disaster that I was talking about when I advocated holding physical gold and gold shares.
At this point, as the majority of gold shares break down technically, each subscribers will have to chose whether to sit tight, whether to cut back, or whether to ride out the storm and continue to hold his gold and gold shares as insurance against a dollar disaster and a deflationary melt-down.
I've emphasized that you should own no more gold than you were comfortable with. I would continue to hold gold coins no matter what or regardless of where the price of gold goes.
As for the gold stocks, technically most of the gold shares are now breaking down, and you may want to sell part of your gold share holdings or you may want to sit. It depends a lot on what percentage of your total assets are in gold shares. If you hold say 5% of your assets in gold shares, and those shares drop say 50%, that will cost you only 2.5% of your total assets, far from a fatal loss. You'll have to choose, I can't do it for you.
I assume (I hope) that most of my subscribers have taken my advice and moved completely out of common stocks. If so, as this bear market moves on, your relative position will improve considerably as common stocks go down and as the economy deteriorates. This is a crucial part of our investment strategy as we move along in this great primary bear market.
Remember what I've said all along -- "In a primary bear market everyone loses, but the winner is the one who loses the least."
People are being wiped out by the thousands by this bear market. Do not be greedy. If you have to take a loss take it. The first loss is the best loss. If you are down 1% or 5% or 10%, believe me, you are way ahead of the game. Take whatever loss you have to take, but get off the track. The Wabash Cannonball is coming towards us at 120 miles per hour, and the brakes have burned out.
As I've said repeatedly, the IMPORTANT THING IS NOT TO TAKE THE BIG LOSS. I'll repeat this again -- do whatever you have to at this point (if you haven't already) so that you will AVOID TAKING THE BIG LOSS. |
