The never-ending
search for gold
Richard Russell snippet
Dow Theory Letters
Nov 10, 2008
Extracted
from the Nov 7, 2008 edition of Richard's Remarks
November 7, 2008 -- I was born
on July 22, 1924. In those days, families that could afford it
had their babies in a hospital. Those were the days before air
conditioning. My mom told me I was born during the hottest New
York July she could ever remember. I grew up during the Jazz
age; I was seven when the '29 crash hit and changed everything.
As a teenager, I grew up during the Great Depression. I still
remember those days well. My parents' best friends lost their
jobs, kids moved back with their parents, and job openings literally
disappeared. I often ate lunch at the Automat. Hungry men and
women would be sitting at empty tables. As you left the restaurant,
your plate was studied. If there was any food on the plate, somebody
would immediately sit at the table and finish up the food that
was left. Outside, men on street corners had little stands at
which they sold apples. My dad always bought an apple for a dime.
Each time he would mumble, "He needs it more than I do."
Dad had a soft heart, and hated seeing old men in tattered clothes
standing in the cold with a little stand on which apples were
displayed. Long lines of desperate men strung out at employment
agencies, you often see pictures of those lines in today's newspapers.
Parks were dotted with makeshift houses called "hoovervilles,"
huts made of cardboard and flattened tin cans stapled together.
Hollow-eyed men walked the streets of New York, asking for "spare
change." Peddlers leading horses and wagons shouted, "I
give cash for clothes." (Note: Goldman Sachs was founded
by a street peddler.)
Last night Ryan and Faye and
I went to my favorite restaurant. We were the ONLY people in
the place. "This is eerie," I remarked, "It's
scary,-- it reminds me of the Depression." The owner came
over to talk to us. "How are things going?" I asked.
The owner replied, "It's tough, but we have one thing in
our favor. We own the building."
Yesterday, Ryan and I went
to a Toyota dealer to look at a Prius. A few months ago people
were paying a thousand dollar surcharge to get one of the hot
Priuses. This time I was tough on the salesman. I told him what
I was willing to spend. He looked at me as if to decide whether
I was serious. Then he brought out his sales manager. He showed
us a Prius, with the company internal rundown which showed the
dealer's exact cost. I told the sales manager, "Look, I'm
in the financial business. I know you guys want to get rid of
inventory, and you've got a heck of a lot of it (the lot
was crowded with cars). Let's trade this car for cash -- your
cost. I'll give you your dealer's COST for the car." The
sales manager paused a few seconds and started filling out paperwork.
"What are you doing?" I asked. He looked up and smiled,
"It's a deal." We shook hands.
Afterwards, Ryan turned
to me and said, "I didn't know you could be so tough, Dad."
I replied, "Hey, I'm a Depression baby. There aren't many
people alive today who have seen what I've seen." Ryan asked,
"Do you think we're going to have another depression?"
I thought a minute and replied, "Yeah, I think we're seeing
the start of it now." Which is exactly what I think.
I also went through the 1973-74
market collapse. This thing is almost worse. This week we saw
the Dow fall over 900 points in two days. Wednesday and Thursday
experienced two crushing 90% down-days in volume. Lowry's
Selling Pressure Index is now down just 6 points from its
recent record high. There's still a mountain of stocks to be
sold. I'm afraid this bear market is saying something very serious.
By next year I think anyone under the age of 50 will be dealing
with the toughest economic times they have ever experienced.
Why do I say that? Take it as the instincts of an old guy who
has been there before. Last night in the restaurant brought back
ugly memories. So did our trip to the Toyota dealer. The punch
bowl has been smashed, and the wine, like blood, is running into
the streets.
But there's a major difference
between now and the 1930's. During the '30s nobody had dollars.
Dollars were scarce as frog's teeth. If you did have dollars
in the '30s, nobody doubted their value. Today I doubt the viability
of Federal Reserve Notes (dollars). I wonder what they'll be
worth a few years from now. Fiat currency is "fool's money".
It's only money because some government says it is. All fiat
money is a function of debt and confidence. There's only
one currency that represents intrinsic wealth (no debt) on its
own. And it's gold. If you can't understand that, you'll never
understand why men over thousands of years have fought, explored,
and died in the never-ending search for gold.
Nov 7, 2008
Richard Russell
website: Dow
Theory Letters
email: Dow Theory Letters
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