- Extracted from the October 7, 2005 edition of Richard's
Remarks
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- Is all paper money basically junk? Of course it is, and
in due time, as the old saying goes, it will be reduced to its intrinsic
value. This is the dreaded secret that the central banks of the world don't
want you to think or recognize. But slowly, ever so slowly, the "dreaded
secret" will emerge, and it will be recognized and acted on by the
masses.
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- We are now in the early part of the second phase of the
great gold bull market. This is the phase where gold starts to make the
news. And when an item makes the news, the great unwashed public notices
and begins asking questions. They don't do anything about it in this early
stage -- they simply ask questions. And the question that a few curious
people ask is, "Hey, why is gold going up? I read somewhere that it's
at a 17 year high." And so it starts. The next question they ask is
-- "What's wrong with the dollar. It's taking more and more of them
to buy gasoline and heating oil and college tuition and rent. Is there
something wrong with the dollar?"
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- These questions may sound innocent, but they scare the
hell out of the Fed. So every week or so some fool Fed governor comes out
and announces that "Inflation looks to be a little high at two percent,
so we better raise Fed Funds another quarter of a percent. You see, we're
just as scared of inflation as you good people are."
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- Of course, the one thing the Fed will never do is compare
the purchasing power of the dollar with it's purchasing power 25 years
ago or 10 years ago or even five years ago. That's a no-no, because the
comparisons are sickening. You see, they have to keep that lie going to
the effect that the Fed, like your dog, Rover, is man's best friend.
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- Here's my idea for a Fed motto -- "Keep it slow,
and they'll never know." The "it", of course, is the decaying
purchasing power of the fiat dollar.
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- On every dollar bill we read the words, "In God
We Trust." Of course, they'd never put the words, "In the Fed
We Trust" on the dollar -- because there's a limit to how big a lie
the Fed thinks it can get away with.
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- The US government is now on a spending binge that boggles
the mind, but I'm not going to recite the statistics on all the debt and
deficits and liabilities again. Let me just put it this way -- the facts
are horrendous. The question is, "How are we going to pay for them?"
There are only two possibilities -- The government will default on them
or the government will simply inflate them away. And the winner (but you
already knew this) is -- inflation.
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- The ironic fact is that today we have "faith-based"
money. Yeah, faith in the Fed. Economically speaking, could anything be
more frightening -- or bearish?
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- The US public may not believe it or even understand it
-- yet, but real money understands it. And now I'm going to shows you a
few charts that I call my "secret weapons." "Secret"
in that most people have never seen them.
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- These are monthly charts along with 20-month and 40-month
moving averages. The first chart, I think, is spectacular. Here we see
gold declining through the 1990s, then recording "double bottoms"
in 1999 and 2001 in the 255 area. In May 2002 something dramatic occurred.
The 20-month (blue) moving average crossed above the 40-month (red) MA.
With that dramatic confirmation, I was convinced that a new primary bull
market was well underway.
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- Since that bullish crossing, gold has climbed irregularly
higher, but always holding above its 20-month MA. Note, also, that the
20-month MA has held persistently above the 40-month MA. That's the sign
of a powerful primary up-trend. Today, up 2.70 at the close, gold has climbed
to highest level since 1988.
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- more follows for subscribers...
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- Richard Russell
- Dow Theory Letters
- © Copyright 2005 Dow Theory Letters, Inc.
-
- Richard 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.
-
- He offers 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,
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if ordered through your business).
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