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Learn from the rich man

Richard Russell snippet
Dow Theory Letters
posted Jan 4, 2010

December 31, 2009 -- This is my year-end special. In it I give you my best advice on gold plus a critically important article from USA Today at the end of this site. [You can read the article Richard's referring to - U.S. in fiscal peril with $12.1 trillion debt - here.] And from a geezer who's been around since 1924, I wish all my subscribers the very best for the coming year and far beyond.

And what will history say about the year 2009? Oh, that was the year when the Masters of the Universe on Wall Street who were "too big to fail" got even bigger, even as they gulped down billions in taxpayers' money and passed out bonuses. And that was the year when the US public got shafted (meaning they didn't get a damn thing). It was also the year when President Obama, coached by his Wall Street advisors, never had a clue as to what was going down. As I've said before, this is a one-term President. And what gifts do the Republicans have in store for us? Perhaps Sarah Palin? God bless debt-choked America.

Question -- Russell, you've been bending our ears about buying gold ever since the year 2000. Out with it, at what point or at what level do I sell my gold or silver?

Answer -- An excellent and important question. The answer (and this may not surprise you) is that you NEVER sell your gold or silver (or platinum, for that matter). These precious metals are an integral part of your estate and net wealth. I don't care what the current price of gold is, gold represents unencumbered wealth.

Let me give you an example from the rich man's standpoint (and remember, this guy didn't get rich by being stupid). The rich man accumulates and holds ten thousand ounces of gold. At one point (such as today) his gold holdings are worth $12 million dollars. He's still rich.

Then gold declines to a price of $700 an ounce during a crushing world deflation. Bankruptcies rule, and the price of anything and everything with debt against it has collapsed. At this point the rich man is holding $7 million worth of gold. The fellow is still very rich. Next comes a run-away inflation and gold climbs to $2500 an ounce. Here the fellow owns $25 million dollars worth of gold. Now he's almost embarrassingly rich, at least in relation to his neighbors.

You see the point. In holding ten thousand ounces of gold, this fellow is always rich, but let's call it shades of rich depending on the economy. So the rich man isn't trying to 'beat" or "out-trade" the gold market. He holds his gold as an eternal store of wealth though good times and bad.

There's only one argument against the above thesis. The argument is that gold becomes a "worthless barbaric relic" of a metal. And suddenly, nobody wants gold. How valid is that argument? Five thousand years of history say that argument is wrong. I've said before that the value of gold appears to be etched into the DNA of mankind. There's never been an instance since pre-Biblical times when men didn't lust after gold.

Conclusion -- Learn from the rich man. Never mind today's price of gold; mind how many ounces of gold you own.


Richard Russell
website: Dow Theory Letters
email: Dow Theory Letters

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