11/01/03 Russell Says - Gold To Reach $556 The Daily Reckoning Weekend Edition
01 November 2003, All Saints Day
New Orleans, Louisiana
By Addison Wiggin and Eric Fry
MARKET REVIEW: Russell Says undefined Gold To Reach $556
The Dow Jones Industrial Average put the finishing touches on
another winning month by advancing 2.3% last week to 9,80. The
Nasdaq performed even more brilliantly last week, gaining 3.6% to
1,932. October wasn't such a frightening month after all,
although it scared the daylights out of a few short-sellers.
The Dow and Nasdaq both defied the ghosts of Octobers past. "With
Halloween passed," remarked Barron's Michael Santoli, "the market
has made it through its toughest seasonal period unscathed.
September and October are historically the worst for stock
returns, but since the end of August the Dow is up 4.1% and the
Nasdaq ahead by 6.7%."
Meanwhile, the gold market is compiling an equally impressive
record, having advanced six out of the last seven months. The
yellow metal added only a dime during October, but has gained
more than $45 since the end of March.
The stock market and the gold market do not typically track
together. And it's a bit mysterious that they would be doing so
now. But their apparent synchronicity is more accidental than
indicative, according to Richard Russell, editor of The Dow
Theory Letters. As Russell sees it, the pricey stock market will
soon veer off into a ditch, while the gold market will continue
chugging along.
Russell, appearing via live video-feed from San Diego, told the
crowded auditorium of conference-goers in New Orleans that the
gold bull market is for real and that it is in its infancy. It's
bullish technical picture is a mirror image of the stock
market's, he explained.
To support of his assertions, Russell noted, "The S&P 500's
20-month moving average has crossed down through its 40-month
moving average, thereby indicating that stocks remain in a
primary bear market.
"But look at the picture in the gold market," Russell urged the
audience. "The picture is a mirror image of the stock market. The
20-month moving average of the gold price is crossing UP through
the 40-month moving average, which shows that gold is in a
primary bull market."
"Gold is now in the accumulation phase," he says. "Gold is moving
to strong hands from weak hands…$556 per ounce is the first
target."
Russell colored his dispassionate technical analysis with a bit
of macro-economic fire-and-brimstone. "The system of fiat money
is really immoral, almost evil. It will not last. Most of us will
live to see the complete destruction of the U.S. dollar," the
octogenarian stack market observer predicted. "When the dollar
collapses, all hell is gonna break loose in the system. Any
questions?"
We wished to ask a couple of questions, like when, precisely, the
dollar would collapse and how high the gold price would soar.
Unfortunately, a technical glitch prevented Russell from hearing
any audio feed from New Orleans. So our questions went
unanswered.
Regards,
Eric Fry,
The Daily Reckoning
P.S. Your New York correspondent, while visiting New Orleans, has
been sampling a few of the city's many splendors and diversions.
He has strolled along the banks of the Mississippi, ambled
through blocks of Chinese-made tourist-trinkets at the French
Market, toured the ante-bellum mansions of the Garden District,
and bellied-up to the blackjack tables at Harrah's casino. He
also spent part of Halloween night shuffling along a
beer-drenched Bourbon Street. He inched along the jam-packed
street, shoulder-to-shoulder with a swarm of cigarette-smoking,
beer-swigging, scary-looking folks…only some of whom were
wearing costumes.
Everywhere he went, your New York editor observed unbridled
consumption. Nowhere in this tourist town did he observe the
slightest hint of recession. The line outside Acme Oyster Bar was
as long as ever. And the line for a $5 Starbucks cappuccino
inside the Sheraton snaked out into the lobby even farther than
it did last year.
Indeed, the local economy is doing so well, that your New York
editor had to wait in line for a chance to lose his money at the
blackjack table. It's easier to find a parking space in Midtown
Manhattan than a seat at a blackjack table in Harrah's. One
night, while your New York editor was busy winning and losing
chips at a blackjack table, a Daily Reckoning reader pulled up a
stool at the same table and started playing. After losing a few
hands, she turned and said, "You know Eric, the only thing worse
than spending money you don't have on things you don't need is
losing money you don't have at a blackjack table."
"Yeah, I guess you're right about that," came the reply. "Maybe
it's not so bad to spend money you don't have on things you don't
need. At least, after you've finished spending the money you
don't have, you've still got the things you don't need…
"I gotta say," as he hit a 12 and busted, "that gambling away
money that DO have is not very fun either."
"Sure," she chuckled, "But at least you and I know that we are
gambling when we are sitting here at a blackjack table. The
buyers of tech stocks selling for 60 times earnings think they're
investing."
P.P.S. Addison and Bill were signing copies of Financial
Reckoning Day here at the conference. There was quite a bit of
excitement surrounding the book… if you haven't gotten your
copy yet, you may want to do so here:
"The most important investment book I have ever read…"
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THIS WEEK in THE DAILY RECKONING
ALL SAINTS' DAY (10/31/03)
By Bill Bonner
"…We celebrate the First Amendment now; we do not practice it.
Likewise, America celebrates liberty. It is like Halloween…an
empty expression…a hollow festival…something to feel good
about. No reflection required. No risk, either. But what would
the ghosts of Jefferson and Adams think of us?…"
http://www.dailyreckoning.com/body_index3.cfm?id=7103
THE TRAGIC DEATH OF CURTIS MOBERLY (10/30/03)
by Dan Ferris
"…I remember what the Christian brothers called us as high
school sophomores: wise fools. That's what investors are today,
and what Curtis Moberly was - may he rest in peace. Wise, having
had a little experience. Fools, not realizing they haven't had
enough experience. Moberly won't get fooled again. I bet
investors will continue to get fooled for as long as there's a
stock market. All across America, investors are about to slide
into an oncoming price slide, the way poor Curtis Moberly slid
into an oncoming Subaru…"
http://www.dailyreckoning.com/body_index3.cfm?id=7080
THE TROUBLE WITH THE WHOLE WORLD (10/29/03)
by Bill Bonner
"…Digital Man is stumped. To him, everything works by simple
cause and effect logic. When the cost of borrowing goes down, the
demand should increase. And yet, not even giving money away could
persuade Japanese business and consumers back into the credit
market. But Analog Man, more heart than brain, understands. He
knows it is his fault. He knows that were it not for him, the
world would be a different place…"
http://www.dailyreckoning.com/body_index3.cfm?id=7072
CLAMOR FOR A CURE (10/28/03)
by Sean Corrigan
"…In a truly free market, where business concerns are free to
compete, replace, and improve each other, profits made by the
foresighted and fortunate will, on balance, outweigh the losses
made by the foolish and foredoomed. And so the seed corn for
future progress is sown…"
http://www.dailyreckoning.com/body_index3.cfm?id=7058
UNDER THE ECONOMIC SUN (10/27/03)
by the Mogambo Guru
"…The big problem with economics is that there has been nothing
new under the economic sun for thousands of years. There has
always been government, and taxes, and buying and selling, and
borrowing and lending, and investing and interest, and sleazy
powerful people enriching themselves, running off into the night
with the company payroll, and bosses sexually harassing
employees, and of course graft, and corruption, and nepotism, and
so on. It wouldn't surprise me to find that this is actually
where the phrase 'some things never change' comes from. And all
of them trying to live at the expense of everybody else…"
http://www.dailyreckoning.com/body_index3.cfm?id=7036
----------------------
HEADLINE, NEWS And INSIGHT
Earnings Growth Evaporation
by John Mauldin
"…Earnings growth is clearly back. Given the recent growth, it
is not hard for many investors to think earnings can once again
grow at 15% a year, which will mean they double in under five
years. The economy is sailing at full speed. Inflation and
interest rates are low. The Fed has clearly told us they intend
to keep rates low for some time. What more can an investor want?
The bull is back. Except if you look at the numbers for a little
longer than 18 months, you find that earnings growth
evaporates…"
http://www.dailyreckoning.com/body_index3.cfm?id=3522
Six Reasons to Invest Offshore
by Mark Nestmann
"…I can think of at least six important reasons to invest
outside the United States -- Top performance… Lower portfolio
volatility… Currency diversification… Protection from
professional liability and other claims… Enhanced privacy…
Safety and security…"
http://www.dailyreckoning.com/body_headline.cfm?id=3510
Consumption -- Recovery Leader or Potential Profit-Killer?
by Dr. Kurt Richebächer
"…The underlying basic fact is that Americans, in the
aggregate, have been spending and continue to spend in excess of
their current income. What is wrong with that? Why should excess
consumption strangle economic growth? The short answer is,
consumer spending in excess of income inherently means also in
excess of production, and this part of consumer spending
essentially emigrates to foreign producers, adding nothing to the
U.S. GDP…"
http://www.dailyreckoning.com/body_headline.cfm?id=3519
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