the dow ~ richard russell comments

September 19 2003 -- I may not write a report over this weekend. Instead, I'm going to ride out to Montgomery Field here in San Diego. The reason is that the famed Tuskegee Airmen will be celebrating their 60th anniversary tomorrow, Saturday. The Tuskegee Airmen were a group of 450 black fighter pilots who were sent overseas during World War II. I met a lot of these guys during the War -- mostly in bars in Italy. But more importantly, they flew fighter cover for us on a lot of our bombing missions (many were attached to the 12th Air Force). I was a bombardier on B-25s with the 12th Air Force, which fought in North Africa, Sicily, Corsica and Italy.

The Tuskegee Airmen flew the big P-47 Thunderbolt fighters, and these guys were good, very damn good. Their leader, General Ben Davis graduated from West Point, class of 1936. At the time Davis was one of only two black officers in the entire US Army.

Many of our bomber crews were saved by the heroic and dedicated action of the Tuskegee fighter pilots, and I hope to say "Hello" to few of them (I don't know how many are still alive) and maybe swap some memories with them when I drive out to Montgomery Field tomorrow. By the way, the Tuskegee Airman flew 15,500 sorties and more than 1,500 mission during WWII, and they showed the world that black men can be both brave and highly effective in combat -- at time when the armed services of the US were totally segregated and when blacks were engaged in non-combatant or demeaning jobs.

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Now I have a confession. I really don't know what's going on in the world. I read a dozen newspapers a day and countless magazines, and I watch CNBC and CNN and FNN and in the end I try to put it all together and make sense out of it -- but it's close to impossible.

Let me give you a few examples. Here's Kenneth Rogoss, the International Monetary Fund's chief economist saying, "The United States has the best recovery money can buy -- it's borrowed a great deal in order the sustain this very high recovery." Now what the hell does that mean? I guess it means we're borrowing like crazy to get a recovery going, maybe in time for the next presidential election. Is that what he means? Who knows?

The I read that the "leading indicators" are up for the fourth month in a row. That's good, assuming that the figures aren't fudged. On the same page I read that "Net worth of the nation's wealthiest is up 10%." I know that the separations between the wealthiest and the average worker is widening. That's tends to create anger. And today I read that "less than half of US workers, 48.9%, say they are satisfied with their jobs, the lowest since the Conference Board survey started in 1995."

And what's this? In today's paper I see that Senator Teddy Kennedy says that the administration's case for going to war with Iraq was a fraud "made up in Texas" to give Republicans a political boost. Worse, Teddy says the Bushies haven't revealed where nearly half the $4 billion a month for Iraq and Afghanistan is going. Teddy thinks half of it is going to bribe foreign leaders to send in troops. Great balls of fire -- can all that possibly be true? Can Teddy say that? I guess he can -- isn't there a law that says you can't sue Senators or Congressmen for libel?

Then I read in US News and World Report (on the editorial page) that half the gains in the second quarter of this year were due to defense purchases. "Another chunk was due to investment in computers, which soared by $38.4 billion. But the vast majority of computer investment never occurred. Given the bizarre way government statistics are compiled, nobody actually paid anything and nobody received anything. That's because Washington measures computer investment by calculating how much it would have cost in 1996 to buy a computer of equivalent power to today's machines. On the $38.4 billion in increased computer investment, therefore only about $6 billion was real spending. The other $32 billion was a statistical construct, which is just a fancy way of saying that it wasn't real. Without that false comfort, we would have been looking at a second-quarter growth not of 3.1 percent, but of roughly 1.7 percent -- and most of that attributable to defense spending. Profits tell the same story, down $31 billion from the first quarter."

So maybe that's it. Slow growth accounts for the month after month of lousy employment data. That leaves me back with my original question -- "What can I believe." I guess the answer is -- not much.

What's all this got to do with the markets and our efforts to "make money" investing -- or at least to survive in the current world of investing? I guess not much, but hey, it never hurts to be an informed citizen. After all, democracy depends on an informed electorate, and all I'm trying to do is be informed in a vast ocean of propaganda, falsehoods, white lies and BS.

What about the markets? Don't the markets have the ability to cut through all the nonsense and arrive at the truth of what's happening? Well, yes, but the market can first take us through a number of deceptive streets and allies. So even when dealing with the markets, we must try to separate the true trends from the false ones.

This is the reason I keep emphasizing the primary trends. The big money is made investing early in a bull market and staying with the bull market for months, years, maybe even decades until the bull market finally fully expresses itself. The "full expression" of every major bull market is what I call "super-speculation." The full expression of every bear market is abject pessimism. Big bull markets and big bear markets always end in "exhaustion" Exhaustion in a bull market occurs when the last bull has spent his money. Exhaustion in a bear market occurs when the last bear has dumped his last stock.

Despite fears, deceptive "sell signals," warnings, propaganda, incorrect trading advice, I've told subscribers that there's one major primary bull market, and that bull market is in tangibles.

The king of the tangibles is real money -- gold. Sure diamonds and rubies are fine, Picassos are marvelous, homes are terrific, land is great -- but the king of tangibles is gold. Gold is also liquid, priced minute to minute, and, well, gold looks great. Hold a pile of a dozen American Eagles in your hand. And by God, you know in your guts this is intrinsic value. The Egyptians knew it, the Greeks knew it, the Romans knew it, the adventurers who opened up California knew it, the men who put their lives on the line rushing up to the Klondike knew it.

Gold can't be "created" like the phoney currency that is ground out by the world's central bank. There are five parts of gold in every billion parts of earth, and it costs time and money and sweat man power to pull gold out of the earth. Which is why central bankers hate gold. Central bankers can't create gold at will. Gold represents discipline, and when the Fed creates $60 billion of M-3 in a single week, that isn't discipline, that's monetary insanity.

When governments go "nutty," when all around you is madness, when either inflation or deflation reigns supreme -- knowledgeable, seasoned investors turn to the safety of gold. In hard time anything and everything with debt behind it can go bankrupt. Gold can't go bankrupt because it's pure, unquestioned intrinsic money.

Central bankers claim that gold is just a commodity, that it isn't money. Really? Try this -- find a central banker, and tell him that you'll sell him 100 krugerrands for $340 a piece. First he'll ask you if you're legitimate. Then he'll buy those krugerrands in a flash. Why? Because he knows that he can sell those 100 krugerrands at the market which is nearer $400 than $340. Is gold money? You bet it is. And in his guts, every central banker knows it.

I'm watching the gold action this morning, and I'm thinking to myself, "This is how a bull market works. It goes up, then it drifts around for days, weeks, maybe even months. Investors in the bull market get worried, they get annoyed, they get antsy, and finally they're worn out, and they dump their wares. Shorts build up against the primary trend. Then, without warning, the primary bull forces assert themselves, and the item surges higher. That's the feeling I get about gold as I watch it push higher this morning.

This is primary bull market action. It's the kind of action that builds fortunes to its believers. But in this early stage of the gold bull market there aren't many believers. I hope that my subscribers are believers. I've done all I can. I've talked and written and encouraged you guys and gals to buy gold and gold shares. The rest is up to you.

TODAY'S MARKET ACTION -- Not a bad day for stocks, bad day for the dollar and a good day for both bonds and gold.

My PTI was down 4 to 5343. The 89-day moving average was at 5304, so the PTI remains bullish by 39 points.

The Dow was down only 14.31 to 9644.22. There were no movers in the Dow today.

Dec. crude continues to slide, down .16 to 26.82.

Transports, ridiculously overvalued, were down 30.36 to 2794.71.

Utilities, the nearest thing to values (they actually pay nice dividends) were up .90 to 250.13. SO and ED really appear safe.

There were 1761 advances and 1447 decline. But volume was dominant. Down volume was 53,7% of up + down volume.

Total Big Board volume was 1.44 billion shares.

S&P was down 3.27 to 1936.31.

Nasdaq was down 3.81 to 1905.74 on 1.85 billion shares.

My Big Money Breadth Index was down 2 to 278 to 13311.

Dec. Dollar Index was down a large 1.01 to 95.30. Dec. euro was up 1.20 to 113.35. Dec. yen was up .83 to 87.78.

The FOREX (foreign exchange) crowd is beginning to take into consideration the massive US trade deficit, budget deficit and current account deficit. They seems to be just a bit suspicious of the US recovery, thus the weak dollar.

German DAX was down 41 to 3578. Dec. Nikkei was down 300 to 10860.

Bonds were higher. Dec. 30 year T-bond was up 15 ticks to 109.04 to yield 5.06%. Dec. 10 year T-note was up 6 ticks to 112.17 to yield 4.16%.

Top-grade tax-free munis continue to be bargains compared with riskless Treasuries. When I say "riskless," I mean riskless as far as getting your money back. Of course, when you finally get your money back, it may not be worth much, but you will get your money back -- in dollars.

Spread between yield on 10 year T-notes and the 10 year TIPS back below 2.00 again at 1.98. Bond market saying that inflation is simmering down.

Dec. gold was up 5.20 to 382.90. So far, the squeeze (and this is very rare) is on the heavily-shorted commercials. Dec. silver was up 2.7 to 5.29. Oct. platinum was down 2.50 to 695.30. Dec. palladium was up 5.25 to 222.75.

Gold/Dollar Index ratio up 9.40, breaking out to a new high of 401.60.

One share of the Dow buys 25.18 ounces of gold.

One ounce of gold buys a whopping 72.2 ounces of silver. The historic ratio is around 34 ounces of silver. Silver is cheap on an historical basis.

Gold advance-decline line was up 16 to 1287.

XAU was up 2.77 to a new high of 95.38. HUI was up 4.52 to a new high of 204.67.

ABX up .60, ASA up .50, AU up .75, CDE down .17, GG up .34, GLG up .77, GSS up .28, bellwether NEM up 1.42 to a new closing high of 40.55, PDG up .50, RANGY (I bought some today) up 1.12, RGLD with a good chart up .36.

Big winners today -- RANGY up 8.72% and GSS up 7.57%, GLG up 5.95%.

Gold acting well as are the gold shares. The "stealth" bull market in gold continues. The less we hear about gold, the better.

STOCKS -- My Most Active Stock Index was down 3 to 302.

The 15 most active stocks on the NYSE today were -- LU down .03, NT up .21, TYC up .88, GLW up .15, GE down .22, PFE down .43, NWL down 1.50, C up .24, AOL (say good bye to the name AOL) down .18, ABC down 1.80, HPQ up .15, NOK up .21, JPM down .31, PCS down .15, MOT down .06.

VIX was down .23 to 19.07 -- and so far, instead of being a contrary indicator, option-sellers have been right and right on.

McClellan Oscillator was down 10 to plus 76 (sorry about yesterday's incorrect posting). The Oscillator looks "tired."

CONCLUSION -- The stock market gave up very little today and breadth was actually up. But it's just possible that the stock market is "straining" on the upside.

Gold acting well, but I still get the feeling of "nervousness" and "distrust" regarding gold and the gold stocks. At the slightest backing off in gold, all the gold stocks "tremble" and back off. It's still accumulation time for the precious metals and their mining stocks.

That about wraps it up for today. Not sure I'll write anything over the weekend. If nothing tomorrow, Saturday, check this site on Sunday. Just don't know if I can keep my big mouth shut (I do have to learn how to rest).

Signing off,

Russell

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Robert Cambell (858 481 3235) puts out a bi-monthly report which is really a sort of technical analysis of San Diego real estate. Bob uses five criteria such as "notice of defaults," "existing home sales," etc. and he give each of these "vital signs" a grade. Then he make a composite of the five, and comes up with his conclusion. Of course, this study specifically deals with San Diego. Says Bob, "the plus 12 reading on the Real Estate index is the highest reading we've seen since April 2000, illustrating the strength that currently exists in the San Diego real estate market."

In other words, prices in SD continue to head up. Russell Comment -- on average, they're already up better than 15% over last year at this time. San Diego has been one of the hottest real estate markets in the nation, and evidently it's still hot.
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Russell Comment -- It all depends on those punctuation marks --
An English professor wrote the words:


"A woman without her man is nothing"

on the chalkboard and asked his students to punctuate it correctly.
All of the males in the class wrote:


"A woman, without her man, is nothing."

All the females in the class wrote:

"A woman: without her, man is nothing."