Do I have enough gold?
Richard Russell (big snippet)
March 6, 2009 -- This is one
big, angry, nasty grandpa bear. Thursday's losses wiped out all
of Wednesday's gains. Yesterday was the second 90% down-way this
week. Breadth on the NYSE was awful, 12/1 or 12 stocks declined
for every lonely one that advanced according to Dow Jones, 747
stocks on the NYSE closed at new lows yesterday. 3166 stocks
were traded yesterday on the NYSE, and this means that 23.5%
of all the stocks traded yesterday on the NYSE broke to new lows.
Almost one out of four! Awful! To top off this grisly action,
all three D-J Averages, Industrials, Transports, Utilities --
broke to new lows simultaneously. Talk about harmony on the downside,
you're seeing it. Incidentally, the Dow has been down 12 of the
last 14 days (85.7%). Remarkable.
I thought the piece below was interesting and worth taking in.
March 5 (Bloomberg) -- U.S. government plans to spend more than $11.6 trillion to revive the economy are going to accelerate the pace of inflation and send raw-material prices surging, said Michael Pento, the chief economist at Delta Global Advisors who correctly predicted last year's commodity collapse.
The CHART OF THE DAY shows expectations for U.S. inflation during the past two years have anticipated changes in commodity prices measured by the Reuters/Jefferies CRB Index. In May, the Reuters/University of Michigan survey of consumers' expectations for five-year inflation climbed to the highest since 1995, and by July, the CRB index had surged to a record.
Inflation expectations tumbled in the second half of last year, and by December had reached the lowest since September 2002. During that period, the CRB had its biggest six-month decline since the index was created in the 1950s. Expectations for inflation have since rebounded, signaling commodities will climb, Pento said.
"The government has created
a massive increase in the monetary base, and it means we are
entering a massive inflation cycle," Pento said in a telephone
interview from Holmdel, New Jersey. "Inflation will be intractable.
All of these commodities will start to act as an alternative
to currency and start to pick up. Gold should be the primary
investment, and energy and base metals should be second."
I showed this same study on yesterday's site. But just in case you missed it, here it is again. Gold or GLD -- made three attempts (red arrows) to break out of the upper trendline of this large "flag). On the third attempt, gold broke out above the trendline, which is promising action.
Russell's instinct and observations -- I've asked around a lot, and from
what I gather, I'd say that most people have not sold their stocks.
Most are convinced that there's a bottom in the days ahead, and
that the next "big rally" will recoup at least part
of their losses. I think this is hopes and wishes. I don't see
anything in my work that hints of an important bottom. The losses
in this bear market so far, have served to allow many to reason
that "it's been so bad, these losses can't continue,
and that it's time for a big recovery."
Richard Russell began publishing Dow Theory Letters in 1958, and he has been writing the Letters ever since (never once having skipped a Letter). Dow Theory Letters is the oldest service continuously written by one person in the business.
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