Protect yourself, stock up on gold (physical or shares). Have a look at the article below. Richard Russell a renowned Dow Theory chartist and well worth reading.
The reign of US dollar as the world's reserve currency will end and it amazes me the flagrant way Ameriacans are trashing this world. Gold will eventually outshine every other investment class, bonds, Euros and cash.
Richard Russell On Gold
OPPORTUNITY & TIMING - There are a few times in an investor's life when the opportunity for huge profits lies ahead. Such periods in the stock market occurred in 1932, 1942, 1949, 1974 and 1980-82. People who loaded up with common stocks at those times and held those stocks made fortunes.
I believe another such a time is now. And I'm referring to the current young bull market in gold. Subscribers who have been with me during recent years were urged to buy gold stocks back in 1999. Those who did buy the suggested gold stocks and held those stocks now have substantial profits.
I believe that fortunes will be made in the years ahead by those who are now establishing major positions in gold and gold shares. I've said this a number times before, but I want to repeat it -
These primary moves last longer than anyone believe possible - and they take the items higher than anyone thinks possible. We're now in a primary bull market in gold.
I believe gold (and very probably silver) will make fortunes for those who now take major positions in the precious metals.
I want to repeat something that a prominent Wall Street millionaire told me half a century ago - tough words that I never forgot. "Russell, my boy" this gentleman offered, "Do you know why stock brokers never make big money in a bull market?" I confessed that I didn't know. He answered, "They don't make big money in a bull market, because they never believe their own bull shit."
In other words, the brokers tell their clients "what a great market this is," but they're just blabbing. If they really believed that it was a great market they'd be loading up on stocks themselves, which of course, they never do.
So this is my position - I believe gold below and even somewhat above 400 dollars an ounce is dirt cheap. In view of the amount of Fed-generated fiat paper that will have to be churned out in coming years (it will be in the multi-trillions of dollars), gold is the cheapest thing around. The US government, states, cities, corporations and individuals are currently loaded with $32 trillion in debt. On top of that, the US government has additional unfunded liabilities of around $44 trillion, all of which will have to financed.
For these reasons, it's my thesis that gold at $400 an ounce is ridiculously cheap. As a comparison, gold today is less than half the price it was at its 1980 high. I believe three or four or five years from now we'll look back at today's price of $400 gold and ask ourselves, "Where the devil were we? What were we thinking about? Gold at $400 was cheaper than dirt. Why didn't we recognize this back in the year 2003?"
As I see it, this is one of those rare times in an investor's life when he can buy an undervalued asset at a bargain price. This is a time when you can buy real money with fiat paper. At this time you can buy real money, gold, with "junk" fiat paper which is created "out of thin air" by the Federal Reserve.
Big profits have already been made by those who bought gold and gold shares two or three years ago. But that is nothing compared with what I see ahead - as the bull market in gold moves on. We are now in the accumulation phase of the gold bull market. This is the phase where seasoned, knowledgeable investors build their positions - even while the public and most neophyte "investors" are either ignorant of what's happening or at a time when the public actually dislikes the very product which could make them a future fortune.
But the secret to all this is the necessity to ACT. Knowledge is wonderful, but in this business, knowledge isn't worth a damn unless you have the courage to "pull the trigger" - to ACT.
I've listed gold stocks and gold and gold funds until I'm dizzy, until some subscribers have written to tell me that I should "get off gold," that they're tired of hearing about it. So, dear subscribers, it's now up to you. Bull markets are great, knowledge is great - but there's no substitute for acting. Act, act, act.
BONDS & GOLD - There are a lot of misconceptions about both bonds and gold. For instance, it's widely held by many advisors that bonds are a racket. Or as crusty old Franz Pick used to say, "bonds are guaranteed certificates of confiscation." Of course, over the long term that is absolutely true, due to systematic central bank inflation. But bonds do throw off interest, and if you have enough bonds, and you continue to reinvest most of the interest you can live off your bonds.
Sure, in the end bonds will chip away at your purchasing power, so to offset the cost of inflation you must save. For instance, if inflation is 5% you must save enough and compound enough to increase your income 5% every year. That can be done, and I've done it.
Then there is this stupid misconception about gold. For instance, I often hear some ignoramus say, "What good is gold? I pay my rent and buy my food with dollars, not gold. If I go to Safeway and buy a load of groceries, the check-out lady won't take a krugerrand in payment. She won't even know what the hell a krugerrand is."
Of course, she won't. So you don't try to pay for your groceries with a gold coin. You simply go to your local coin dealer and sell one krugerrand for dollars. And that's what you buy your groceries with. That should not be too difficult to understand. Furthermore, in time I believe most banks will deal in gold coins. As the price of gold rises, you will see an increasing number of places where you can buy and sell gold.
Question - "What percentage of gold and silver should you hold in your portfolio?
Answer - This is a question that I can't answer because it has to do with emotions. No matter what I say, some subscribers are going to feel "more comfortable" in dollars, Eurodollars, stocks, Asian stocks, gold, silver or with most of their net worth in their home. Furthermore, as conditions change, as one asset moves up and another moves down, emotions change and thinking changes.
For myself, I want roughly one-third of my assets in gold with some silver. I don't want any common stocks, and I want some German short bonds denominated in euros. I'm afraid of the dollar, but I have a house that's denominated in dollars, and I have some muni bonds denominated in dollars. I honestly don't know what the "cup of gold" is in this economy, but I do know that I don't want any debt.
As I see it, we're at a very interesting and economically dangerous period in history. We have the problem of terrorism. We have the problem of the US spending $400 billion a year in defense. We have the problem of the massive negative trade balance, negative current account balance and the huge negative budget balance.
It's almost impossible in my mind to understand how the dollar can hold up against the spending and debt-building that the US is now incurring. Again, this bespeaks to me of the safety of gold.
I view the current situation as the US sort of "sleep-walking" through a maze of potential dangers. The stock market is overvalued, real estate is overvalued, the dollar is overvalued, yet there is a strange sort of "What me worry?" attitude in the nation. Maybe I'm just a born worrier. But I don't think so - I believe I'm a born realist. Let history be the judge.
Richard Russell Editor-in-chief - DOW THEORY LETTERS www.dowtheoryletters.com/dtlol.nsf
November 25, 2003
The inimitable and venerable Mr. Russell gained wide recognition via a series of over 30 Dow Theory and technical articles that he wrote for Barron's during the late-'50s through the '90s. Through Barron's and via word of mouth, he gained a wide following. Russell was the first (in 1960) to recommend gold stocks. He called the top of the 1949-'66 bull market. And almost to the day he called the bottom of the great 1972-'74 bear market, and the beginning of the great bull market which started in December 1974.
