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Gold & Precious Metals

The 88 Yr Old Legend (Bought Below $300) Gold will shoot up to unbelievable prices"


Posted by Richard Russell - Dow Theory Letters

on Wednesday, 06 June 2012 00:00

"Gold -- I've been thinking more and more about the yellow metal. Price action -- Over the last month gold has had every opportunity to break down below 1500 and undergo a full correction. But it never happened. What the market doesn't do can be as important as what the market does do. Of course, the gold mining stocks underwent a full correction, and many gold "experts" warned that the metal would follow the gold mines down. It never happened, which I took as very bullish for bullion.

In this business, logic and reality usually win out, although sometimes it seems forever before this comes to pass. In the long history of paper fiat money, no fiat currency has ever lasted for long. And this is as it should be. It's illogical, immoral, and against reason that a group of men at a central bank should be able to print or publish wealth at will -- to create wealth out of thin air.

Thus, I am taking it for granted that history will repeat. In due time all of the current fiat money that is being ground out by the various central banks will be footnotes in monetary history. But this won't happen overnight. It may take many months or even years. But while it is happening, intelligent men and women will sense the trend. As the news of the slow death of fiat money becomes accepted, smart investors will be looking for tangible substitutes for the dollars and the euros and the reals that they hold. 

Already this is happening; we can see it in the astounding prices certain works of art are selling for. It's happening in many areas. Babe Ruth's 1934 uniform just sold for $400,000. Diamond prices are up 35% over the last few years. Classic cars are being auctioned off in the millions of fiat dollars. In dozens of areas, tangible items are being purchased at outrageous prices. Munch's pastel work, "The Scream," just sold at auction for $110 million dollars, a record.

I believe that gold is far behind the game. Gold has been recognized as a medium of purchasing power for five thousand years. Most of Asia understands gold, but decades of anti-gold propaganda has turned Americans against bullion. Proof -- try to pay for your next restaurant dinner with a one-ounce gold krugerrand.

This is starting to change. For ten years running, the price of gold has pushed higher. Even this remarkable record has not changed US sentiment towards gold. 

Gold is in a classic bull market. I think gold is in its second psychological phase.The second is the longest phase of a bull market. It's the phase where the public slowly becomes interested in an item.

I believe that the third sentiment phase for gold lies ahead. In the third phase the public finally turns bullish, then more bullish, and finally all-out insanely bullish.

What will be the signs of the third phase of the gold bull market? First, new inflation adjusted highs in the price of gold (gold above $6,200). Next, gold will be the focus of every conversation; it will become THE talk at parties and wherever people gather together. Next, gold coins and bars will disappear. The coin dealers will be out of gold and will start touting silver and platinum (the prices of which will be rocketing higher). Finally, the naysayers will start warning of a "gold bubble." But their warnings will be early. The price of gold will shoot up to unbelievable prices."

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Russell began publishing Dow Theory Letters in 1958, and he has been writing the Letters ever since (never once having skipped a Letter). Dow Theory Letters is the oldest service continuously written by one person in the business.

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.

The Letters, published every three weeks, cover the US stock market, foreign markets, bonds, precious metals, commodities, economics --plus Russell's widely-followed comments and observations and stock market philosophy.

In 1989 Russell took over Julian Snyder's well-known advisory service, "International Moneyline", a service which Mr. Synder ran from Switzerland. Then, in 1998 Russell took over the Zweig Forecast from famed market analyst, Martin Zweig. Russell has written articles and been quoted in such publications as Bloomberg magazine, Barron's, Time, Newsweek, Money Magazine, the Wall Street Journal, the New York Times, Reuters, and others. Subscribers to Dow Theory Letters number over 12,000, hailing from all 50 states and dozens of overseas counties.

A native New Yorker (born in 1924) Russell has lived through depressions and booms, through good times and bad, through war and peace. He was educated at Rutgers and received his BA at NYU. Russell flew as a combat bombardier on B-25 Mitchell Bombers with the 12th Air Force during World War II.

One of the favorite features of the Letter is Russell's daily Primary Trend Index (PTI), which is a proprietary index which has been included in the Letters since 1971. The PTI has been an amazingly accurate and useful guide to the trend of the market, and it often actually differs with Russell's opinions. But Russell always defers to his PTI. Says Russell, "The PTI is a lot smarter than I am. It's a great ego-deflator, as far as I'm concerned, and I've learned never to fight it."

Letters are published and mailed every three weeks. We offer a TRIAL (two consecutive up-to-date issues) for $1.00 (same price that was originally charged in 1958). Trials, please one time only. Mail your $1.00 check to: Dow Theory Letters, PO Box 1759, La Jolla, CA 92038 (annual cost of a subscription is $300, tax deductible if ordered through your business).

IMPORTANT: As an added plus for subscribers, the latest Primary Trend Index (PTI) figure for the day will be posted on our web site -- posting will take place a few hours after the close of the market. Also included will be Russell's comments and observations on the day's action along with critical market data. Each subscriber will be issued a private user name and password for entrance to the members area of the website.

Investors Intelligence is the organization that monitors almost ALL market letters and then releases their widely-followed "percentage of bullish or bearish advisory services." This is what Investors Intelligence says about Richard Russell's Dow Theory Letters: "Richard Russell is by far the most interesting writer of all the services we get." Feb. 19, 1999.

Below are two of the most widely read articles published by Dow Theory Letters over the past 40 years. Request for these pieces have been received from dozens of organizations. Click on the titles to read the articles.

"Rich Man, Poor Man (The Power of Compounding)"

"The Perfect Business"



Timing & trends

Wave Chart of the Dow: "we are entering the most powerful leg of the down wave"


Posted by Jack & JR Crooks - Black Swan Capital

on Tuesday, 05 June 2012 10:19

Below is our updated wave chart of the Dow Jones Industrial Average.  We get the sense that if we don’t get 

the “bounce” higher soon, this market can fall hard i.e. major capitulation from the newly anointed bulls.  By our 

count we are entering the most powerful leg of the down wave.  We are assuming the bear market rally to 13,339 on 

May 1st is done! [Labeled 2 of 3] We want to remain long-term short equities and most risk asset markets as the 

global macro is playing out as we anticipated.  

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Subscribe to Black Swan's Free Currency Currents HERE (subscription lower right side)



Personal Finance

10 Suggestions for Working with Financial Advisors


Posted by Barry Ritholtz: The Big Picture

on Tuesday, 05 June 2012 08:08

via The Big Picture

1. Societies, Economies and Markets Move in Long Cycles: Investors have to understand long cycles — and that half of them are not good:

Think about the post WW2 era — GI Bill sent millions of returning soldiers to school, the building out of suburbia, rise of the car culture, construction interstate highway system, civilian air service, broad electronics development — its no coincidence that 1946-66 was a long term secular bull market (good) for stocks. This investors paradise was followed by an ugly period: 1966-82 had VietNam, Watergate, Oil Embargo, Inflation, etc. In 1966 the Dow was 1000 and in 1982 it was still 1000 — 16 years, no gains (not good). The next good run was the 1982-2000 period that saw the rise of the PC, chips, software, internet, mobile, networks, storage etc. Another golden era for investing. (good). Do I need to explain 2000-2012 and counting? (not good).

If you don’t understand these cycles, you will not be a successful investor.

2. Long term doesn’t matter if you are in the middle of a bear market: Like we are today. I cannot tell you when it will end, but history suggests sometime before the next 5 years are over.

During these secular bear markets, your job is to reduce risk, carry more cash and bonds, and wait for better times. Tactical adjustments are what get you through these periods — not sitting fully invested in equities and getting shellacked. (See number 1 above)

3. Ignore pretty charts in Marketing Materials: Whatever you are shown in glossy brochures is nonsense sales bullshit. Never make any decision based on the old couple walking down the path, or a picture of boats. Its junk advertising — and amazingly, it is an effective way to capture the suckers.

Howard called it “bullshit” in the audio — and it still ensnared him. That’s how effective it is.

4. Your advisor should help you to Educate you.. More than just managing your money, your advisor should help you understand what is occurring financially in the world.

They should have a working knowledge about valuation, trends, economy, sentiment and market internals. They should be able to tell you what is working and what is not and why. A good advisor can contextualize the headlines, not merely read them to you. They should be able to answer all of your questions, and when they cannot, they should honestly tell you so — and then go find the answer for you.

5. Buy & Hold is for Secular Bull, Not Bear Markets. Buy & Hold is folly during secular bear markets like 1966-82 or 2000-to-today. Simply stated, it is against human nature and therefor will not work. People get tired, annoyed and angry. Human nature is such that no one wants to lose money for 15 years. This ultimately leads to frustration and bad decision making.

Secular bear markets like the one we are in right now is not when you want to work with a buy & hold advisor (like Howard’s).

6. Caution When Too Much Wealth is Tied Up in One Stock: You would think that this lesson would have been learned after Worldcom, Enron, Lucent, Lehman Brothers and soon Facebook, but apparently not.

Anyone with a substantial amount of their personal net worth tied up in a single company needs to diversify that holding as soon as possible. We can argue if 40% or 75% is too much, but the short answer is if you are even debating it, you need to diversify your risk away from that one holding. PERIOD.

7. Build a Bond Ladder 7-15 Years Out: Ladders are bond portfolios of differing maturities (rungs) designed to capitalize on falling or rising yields. Higher yields means you build a longer ladder (15-20 years); low rates like today means you keep it shorter duration. HNW investors should have a substantial income stream from a diversified portfolio of Treasuries, A-rated Munis and investment-grade Corporates. With rates this low, the bond ladder should be no longer than 7 years.

8.  Rising Bond Prices = Lock in Yield: This has been a 30 year bull market for bonds. Anyone who is HNW should have been advised to ladder a portfolio decades ago, up to as recently as 2005-06.

You can still build  a bond ladder today — just don’t expect too much in way of returns. Expect higher or more normalized rates in the future.

9. Collars (XM Sirius) There are occasions when great concentrations of stock wealth cannot be sold immediately. These are what the costless stock collar was invented for. It uses stock options to lock in a range of prices, and dramatically reduce the downside risk.

Let’s say hypothetically, if you owned 400 million worth of Apple, and were getting nervous. They could sell the January 2014 600 calls for $92, use the proceeds to buy January 2014 535 puts for $89. Upside is limited to $600, but the downside is capped at $535.

This is what should have been done for Howard back when SIRI stock had some value.

10. Covered Calls: Lacking a collar, the SIRI stock is now under $2. Depending on the stock holding, income can be generated writing covered calls — selling out of the money options to pick up revenue. This is only done if the writer is happy to sell and does not believe the stock has much upside.

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via Barry Ritholtz excellent site:  The Big Picture



Bonds & Interest Rates

The Bond Market Is Hinting At A Huge Disappointment For Stocks On June 20


Posted by ZeroHedge

on Tuesday, 05 June 2012 07:47

When it comes to the future, suddenly torn by economic uncertainty driven by a plunging stock market and a tanking economy, the talking heads and the sellside brigade have opined:more QE, preferably in the form of asset purchases. After all it was none other than Goldmanearlier today who said that "our confidence that the FOMC will ease policy once more at the June 19-20 meeting has also grown... Our baseline remains that Fed officials will purchase a mixture of mortgages and long-term Treasuries, financed via balance sheet expansion... If they decide to extend their balance sheet, they could add excess bank reserves or “sterilize” the reserve impact via reverse repos and/or term deposits." In other words....

....read the entire article HERE

down-trend



Gold & Precious Metals

Gold and Dow Flash the Same Warning Signal


Posted by Greg Hunter: USA Watchdog

on Tuesday, 05 June 2012 07:13

On Friday, both gold and the Dow flashed the same warning signal—the economy is in deep trouble.  The Dow plunged nearly 275 points on the news of a weak jobs report, and gold rocketed higher by $66 on speculation global bankers are going to print money to resuscitate a dying financial system.  You do not get this kind of tandem move in opposite directions by coincident.  Last week, both the stock and gold markets appeared to stop pretending and acknowledged the vortex of debt and insolvency that could suck us all into a black hole.

Renowned gold expert Jim Sinclair of JSMineset.com said Friday, “Those popular gold writers calling for much lower gold prices are simply out of their mind and disconnected from reality.” 

....read more HERE

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