Note please what he says about all non-bullion items...
August 19, 2008 -- You lend a fellow $20,000 on credit and as collateral he lends you his jade statue to hold -- the statue is worth $20,000 in the market. Then the price of jade hits the skids, and you're sick. This is what happened to the US banking system -- they were putting out mortgages by the tens of millions with over-priced homes as collateral. It was all based on the price of real estate going up forever. Then the price of housing topped out and millions of mortgaged homes headed down in value. DOWN went the banks' collateral, and hundreds of banks were in trouble. Many regional banks won't make it as their collateral goes down and down, the net worth of these banks is heading for zero and the price of their stocks is plunging. That's the story in brief of one of the greatest banking crises in US history. My PTI was down 6 today to 5910. Moving average was 5931. PTI remains bearish by a large 20 points!
What do we do? Where do we go? Put your money in T-bills and await the coming next great buying opportunity with good stocks scraping the bottom. The stock market is now in full crash mode, and where it ends nobody knows.
In the meantime, the US balance-of-payments continues in negative shape. As I've written so many times, we're a global empire living on borrowed money. Our goofy president insults our biggest creditors -- Russia and China -- and seems totally oblivious of the situation. No empire can continue afloat while borrowing money to do so. At some point, nobody will lend the US money, at which point the empire starts to unravel. The dollar plunges, the US becomes a paper tiger. The all-important reserve status disappears.
The good news, for the first time, Lowry's Selling Pressure Index is trending down, the big money may be pulling back from their selling. We may have already seen the PEAK of the Selling Pressure Index (supply) -- we may have already seen the LOW for the Buying Power Index (demand) which is trending higher. It could be heading for the "best market bottom" since 1980 with blue chip stock bargains galore. Remember, you need cash to buy at a great bottom!
Who got us into this economic trouble? Greenspan, who supplied the ammo to create the housing bubble -- SIX MONTHS OF 1% fed funds. Subscribers know I never liked Mr. Greenspan. Everybody telling Alan how smart he was may have softened his brains.
The shocker of the Olympics so far isn't Michael Phelps. It's the total failure of the US to place in the men's sprints for the first time in history.
Note-- I'd like subscribers to get rid of all non-bullion gold items and build cash. Sell GDX, SLV, XAU, HUI, and get flush with cash for the bargains that lie ahead as this market moves towards its inevitable final low. My next site will be August 28 - I'm going to rest until then.
I'm feeling good -- Russell Many thanks for all the get-well e-mails.
