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What do the Chinese know that we don't?

Richard Russell snippet
Dow Theory Letters
Feb 7, 2011

February 4, 2011 -- What do the Chinese know that we don't? According to my favorite newspaper, the Financial Times, the Chinese people are buying gold like there's no tomorrow. According to the Times, "Precious metals traders in London and Hong Kong said on Wednesday they were stunned by the strength of Chinese buying in the last month. The demand is unbelievable. The size of the orders is enormous. . . . . Official data shows China importing 209 tonnes of gold during the first ten months of last year: vs. 333 tonnes for India the entire year. . . . Traders say China will overtake India as the largest consumer of gold this year."

Russell Comment -- China and India, between them, have a combined population of 2.6 billion people or near one half of the planet's entire population. China's leaders have been urging China's people to buy gold. India's population needs no urging, gold is built into the DNA of most Indians.

In answer to the question, "What do the Chinese know that we don't?" The Chinese know that all fiat paper eventually ends worthless. They also know that through the ages gold has been a store of value. The Chinese see their government getting out of dollars, and they are following their government's example. The Chinese people's alternative choice vs. fiat paper is gold.

The American people see that the Fed is now the world's largest holder of Treasuries. Treasuries are denominated in dollars. Americans are following the Fed's example. Americans are staying with Federal Reserve notes, still mislabeled as "dollars."

A dollar was originally defined in terms of specific weights of gold and silver. There is no definition for a Federal Reserve note. A Federal Reserve note can only be defined in terms of other fiat currencies.

So where are we? My studies show that the primary trend of the stock market remains bullish. Therefore, I recommend pilot positions in DIAs and more if there's a correction.

My studies indicate that the bull market in gold is still intact. The ideal position in gold is to hold the actual physical metal (hide it where you want). Otherwise, own "paper gold, GLD or SGOL.

I believe the world has "had it" with the Fed, the US Treasury and the US dollar. Swap your dollars for either of the above.

Sell your Treasuries, your munis, and all bonds. Sure they'll pay off, but they'll pay off with shrunken dollars.

A decent loaf of bread may cost you two bucks today. Ten years from now, the same loaf of bread may cost you ten shrunken dollars.

It will still be a decent loaf of bread, and they'll still call a dollar "a dollar." But that dollar will have lost maybe 90% of its purchasing power. No wonder the Valley Girls are screaming OMG. They're thinking about the future of the dollar.

Come to think of it, when I was a kid it was considered a sin to take the name of the Lord in vain. OMG! But who cares about sins here in 2011?


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

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