Today from Russell:
<The employment news got a big bullish welcoming from the stock market this morning, and as I write the Dow is up 122 points to 9611, well above that 9504 halfway level again. Will it hold this time? Will the market pull away to the upside this time? Maybe, yes, maybe this time. Still --
In this business, you really have to jettison your prejudices, your wishes, your hopes. Face it, the stock market is grabbing at any kind of "good news" and it seems obvious that the market wants to go higher. Thus, you either "get with the program" or you stand aside and watch the show.
I have a lot of subscribers who are "gold-bugs" and automatically want to see the stock market go down. My advice is, "Don't mix the two." If the stock market wants to go higher (check out my PTI), fine, let it go higher and keep your prejudices out of it. By the same token, if you don't want to fool with an overpriced market, fine, leave the market alone. There's no law that says you have to be in on every move. One thing about the market, it's always there. If you don't like it today, you may like it tomorrow or next months or even next year.
Then there are those who trade on the basis of what my PTI is doing. Many of these people are in Diamonds or Spyders, and so far they're doing fine. These are the true traders, the people who ignore everything else and operate on the principle that "the trend is your friend."
Now I want to talk about something else that has me thinking, pondering and wondering. Yeah, it has to do with gold.
Think about it -- the world sends us their merchandise and services, and we pay them with fiat dollars that costs us nothing to produce. So our overseas friends take in these phoney dollars, and they continue to sell us their goods. Why? Why? Why are they doing it?
Easy, they're doing it so that they can continue to sell us their goods. The whole system is an unbelievable fairy tale, better known as a fraud. Reserves pile up in China and the Asian countries, fomenting inflation there. China, in fact, has a bubble problem in its coast real estate. And bank loans in China are now absurdly easy to get.
We buy their goods and send them our home-made fantasy currency, and they take in our fantasy currency so they can continue to sell us their goods. And the big question is -- how long can this go on? And doesn't it remind you of the great fraud under Russian Communism? -- "We pretend to work, and they pretend to pay us."
So my conclusion to the whole ridiculous situation is that it may well continue as long as gold does not surge or blow off to the upside. You see gold is the item that can spoil the game. If gold starts to surge, people are going to ask questions. The frightening question will be, "Why is everybody so anxious to swap paper for gold?" This is comparable to asking, "Where the hell are the emperor's clothes?"
This is the basic reason why the central bankers of the world both fear and despise gold. It's because rising gold can "blow their cover," Rising gold can expose the dreaded secret -- paper currencies are just central bank paper with nothing behind them except a government's edict that "this is legal tender."
The way things are going, I believe that the safest thing my subscribers can do is to accumulate actual gold in the form of gold coins. The speculative position, the leveraged position, is to buy the stocks that mine the gold. Take your choice, or if you want, but some of each.
Question -- Russell, why are you talking so much about gold? Has gold become an obsession with you -- or what?
Answer -- I like to deal with fundamentals. The fundamentals of the situation, in my considered opinion, is that gold is in a primary bull market, while the stock market is in a manipulated secondary correction in a bear market. And I always put a lot of emphasis on what I believe is the prevailing primary trend. I trust the primary trend, while I don't trust rallies in a bear markets, no matter how impressive the rally may be.
I wrote yesterday that I thought a gold correction could be coming up, and that you had to make up your mind either to cut back or sit back. Honest, I didn't know that the gold correction would come today, so I can't take a bow for perfect timing.
Today the powerful Commercials made their move, probably hitting every stop loss on the way down. That's the way these guys make their living, so don't blame the Commercials. They waited quite a while for this hit, and to the winner belongs the spoils, at least that was the story today.
But this is just short-term trading, and it's happened all the way up from the 252 dollar gold that we saw a few years ago to the recent highs. This brand of action will rattle your teeth, but that's the money business. It's not like flipping hamburgers at Mickey D, you know, but in this business nobody promises us a rose garden.
By the end of the year there will be gold ETFs available in the US and Britain (they have them in Australia now), and there will also be gold trading in China plus India opens its gold exchange today. Thus the year 2004 will see gold bullion trading freely around the world, something we haven't seen in 41 years. Did you know that India is the biggest buyer of gold.
I'm watching the dollar. The dollar Index has been declining since September 2, and it's now oversold. So today we got a BIG pop in the dollar off yesterday's low of 92.73 on the December Dollar Index.
What to do next? I know what I'm going to do -- I'm going to check to see what the bond market thinks of inflation/deflation. Here are the figures, hot off the press. The yield on the 10 year T-note is 4.17%. Yield on the inflation-adjusted TIPS is 2.11%. The differential between the two yields is 2.06. Back in mid-July the differential was 1.89, so the bond market sees rising inflation, not surging inflation, but slowly rising inflation. I'll keep you (and me) posted.
TODAY'S MARKET ACTION -- A wild and crazy day. My PTI was up 4 to 5346 and the moving average was at 5310. PTI remains bullish.>
I really liked this:
<So again, I say, "Don't let your stock opinions color you opinions about gold, and don't let your opinions on gold color your action regarding the stock market.>
The general equities and precious metal markets are two only vaguely related phenomenon-There is actually I believe a very faint positive correlation between the two.
Any combination of up down and sideways is is possible.
JMVHO (to which is joined Richard Russell FWIW) |
