01 November 2003, All Saints Day
New Orleans, Louisiana
By Addison Wiggin and Eric Fry
MARKET REVIEW: Russall Says - Gold To Reach $556
The Dow Jones Industrial Average put the finishing touches on
another winning month by advancing 2.3% last week to 9,80. The
Nasdaq performed even more brilliantly last week, gaining 3.6% to
1,932. October wasn't such a frightening month after all,
although it scared the daylights out of a few short-sellers.
The Dow and Nasdaq both defied the ghosts of Octobers past. "With
Halloween passed," remarked Barron's Michael Santoli, "the market
has made it through its toughest seasonal period unscathed.
September and October are historically the worst for stock
returns, but since the end of August the Dow is up 4.1% and the
Nasdaq ahead by 6.7%."
Meanwhile, the gold market is compiling an equally impressive
record, having advanced six out of the last seven months. The
yellow metal added only a dime during October, but has gained
more than $45 since the end of March.
The stock market and the gold market do not typically track
together. And it's a bit mysterious that they would be doing so
now. But their apparent synchronicity is more accidental than
indicative, according to Richard Russell, editor of The Dow
Theory Letters. As Russell sees it, the pricey stock market will
soon veer off into a ditch, while the gold market will continue
chugging along.
Russell, appearing via live video-feed from San Diego, told the
crowded auditorium of conference-goers in New Orleans that the
gold bull market is for real and that it is in its infancy. It's
bullish technical picture is a mirror image of the stock
market's, he explained.
To support of his assertions, Russell noted, "The S&P 500's
20-month moving average has crossed down through its 40-month
moving average, thereby indicating that stocks remain in a
primary bear market.
"But look at the picture in the gold market," Russell urged the
audience. "The picture is a mirror image of the stock market. The
20-month moving average of the gold price is crossing UP through
the 40-month moving average, which shows that gold is in a
primary bull market."
"Gold is now in the accumulation phase," he says. "Gold is moving
to strong hands from weak hands... $556 per ounce is the first
target."
Russell colored his dispassionate technical analysis with a bit
of macro-economic fire-and-brimstone. "The system of fiat money
is really immoral, almost evil. It will not last. Most of us will
live to see the complete destruction of the U.S. dollar," the
octogenarian stack market observer predicted. "When the dollar
collapses, all hell is gonna break loose in the system. Any
questions?"
We wished to ask a couple of questions, like when, precisely, the
dollar would collapse and how high the gold price would soar.
Unfortunately, a technical glitch prevented Russell from hearing
any audio feed from New Orleans. So our questions went
unanswered.
Regards,
Eric Fry,
The Daily Reckoning
P.S. Your New York correspondent, while visiting New Orleans, has
been sampling a few of the city's many splendors and diversions.
He has strolled along the banks of the Mississippi, ambled
through blocks of Chinese-made tourist-trinkets at the French
Market, toured the ante-bellum mansions of the Garden District,
and bellied-up to the blackjack tables at Harrah's casino. He
also spent part of Halloween night shuffling along a
beer-drenched Bourbon Street. He inched along the jam-packed
street, shoulder-to-shoulder with a swarm of cigarette-smoking,
beer-swigging, scary-looking folks... only some of whom were
wearing costumes.
Everywhere he went, your New York editor observed unbridled
consumption. Nowhere in this tourist town did he observe the
slightest hint of recession. The line outside Acme Oyster Bar was
as long as ever. And the line for a $5 Starbucks cappuccino
inside the Sheraton snaked out into the lobby even farther than
it did last year.
Indeed, the local economy is doing so well, that your New York
editor had to wait in line for a chance to lose his money at the
blackjack table. It's easier to find a parking space in Midtown
Manhattan than a seat at a blackjack table in Harrah's. One
night, while your New York editor was busy winning and losing
chips at a blackjack table, a Daily Reckoning reader pulled up a
stool at the same table and started playing. After losing a few
hands, she turned and said, "You know Eric, the only thing worse
than spending money you don't have on things you don't need is
losing money you don't have at a blackjack table."
"Yeah, I guess you're right about that," came the reply. "Maybe
it's not so bad to spend money you don't have on things you don't
need. At least, after you've finished spending the money you
don't have, you've still got the things you don't need...
"I gotta say," as he hit a 12 and busted, "that gambling away
money that DO have is not very fun either."
"Sure," she chuckled, "But at least you and I know that we are
gambling when we are sitting here at a blackjack table. The
buyers of tech stocks selling for 60 times earnings think they're
investing."
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