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Richard Russell Comments

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    Richard's Remarks:

    May 10, 2002 -- After reviewing and studying yesterday market action, I am less hopeful of any kind of bullish resolution for this market.

    I thought Lowry's comments after Thursday close were most significant. Lowry's studies "reflect a weakening pattern." Buying Power (demand) "was lower than it was on Tuesday, and the Selling Pressure Index (supply) is now at its highest level in a month."

    On top of the important Lowry's studies, my PTI, as I noted on yesterday's site, is in a large and bearish head-and-shoulders top pattern. Yesterday the PTI closed at the same low level as Tuesday's close.

    The PTI looks ominously bearish to me. It's well below its moving average, the moving average is declining, and the PTI is in a very bearish top pattern and about to break "support."

    I also note that the M-3 money supply has slipped to the point where it is now showing zero growth. This, in the past, has corresponded to many market momentum tops. It's not a happy situation.

    One great problem is DEBT. Consumers, whose buying is responsible for two-thirds of this nation's Gross Domestic Product, are up to their eyeball in debt and are continuing to take on more debt (but at a decreasing rate).

    However, with money supply growth now touching zero, the mountains of debt become an increasing burden. On top of their debt, consumers have also taken a beating in the stock market. The one real source of consumer funds is the process of taking out loans against their homes. Consumers have borrowed mightily against their homes, and what they've spent this money on God only knows.

    At any rate, in bear markets one negative situation leads to the next, and the debt-pyramid can unravel even more rapidly than it was built.

    If the stock market continues to decline, I believe it could set off negative forces so powerful that the debt structure of the nation could start to topple. If that happens, we will see Alan Greenspan and the Fed move to release a new and even wilder flood of inflationary bank credit.

    This possibility, consciously or unconsciously, is not lost on the world of gold.

    I'm writing this Thursday night with spot gold up .90 and the S&P futures down just slightly. So let's see what tomorrow brings (one thing it will bring for me tomorrow is a chelation session, maybe my 120th or so session (I do chelation every six weeks).

    Oops, here I am on another subject. For newer subscribers, chelation is a treatment which ostensibly clears out plaque from the vascular system. If you are interested (and I hope you are), don't ask your local hospital about it, check it out on the Internet under EDTA chelation.

    Incidentally, over the weekend I ran into an old friend who is about my age. He looked terrible. He just had three stents placed in his chest via angioplasty. I told him that he should check out chelation or at least he should read about it. My friend didn't show the least bit of interest.

    This was a very intelligent man. He was the number two man in a listed NYSE corporation. I can never understand a person who is in obvious bad health, but not willing to at least check into a process that could conceivably save his life. The fellow may think it's bunk, he may be a total skeptic -- but not to even check into it? Amazing! It's beyond me, it really is.

    Gold -- One of the most frequent question I'm asked today is, "How high do you think gold, the metal, could go?

    And my answer is that obviously I don't know. But I do believe we are seeing the first phase of a primary bull market in gold. My experience with modern bull markets is that they tend to rise further than anyone thinks possible.

    Here's a thought that has haunted me. I've followed the major jewelry auctions for years, and I consider myself quite knowledgeable in the pricing of precious stones (rubies, sapphires, diamonds, emeralds). The recognized price for a vivid yellow diamond now runs around 30,000 a caret for say a five caret very good quality stone (I just saw one last week, a five caret vivid, a quality stone priced at $150,000).

    If a fancy vivid diamond can be priced at $30,000 a caret, why can't gold (which I believe is dirt cheap now) go to $1,000 an ounce? Anyway, that's the thought that's been sitting in the back of my little brain. But what do I know?

    By the way, I've been talking about the trend away from financials and back into tangibles. How about this from today's NY Times. "Two historic daguerreotypes of the Paris revolt of 1948 were sold at auction in London (Sotheby's) yesterday for $265,000. I'm talking about two photographs.

    We're now in a primary bear market. In my opinion, despite what we hear, the US economy is going nowhere. I've said before and I'll repeat it, in the face of recession, rather than allow the natural forces of contraction to take place, the Fed will fight any economic contraction "tooth and nail." Thus, in the period ahead I can foresee the Fed creating fantastic pools of liquidity.

    But there's a problem. This liquidity is now going into tangibles -- homes, collectibles, art, jewelry. As the bear market moves on, gold will represent one major defense against the inflationary onslaught of the Fed.

    I just spoke to my local coin shop guy. Back in the '70s gold coins were selling so fast he had trouble locating sources of supply. He couldn't bring in gold coins fast enough. I asked him if there was any actions in gold coins now. His answer -- no action at all. It's as dead as it's been over the last couple of decades.

    What does that mean? To me it mean that we're still in the first phase of the gold bull market. The public is still completely disinterested in gold, both the metal and the stocks. Twenty years of central bank propaganda has turned the public "off" on gold.

    It's early in the bull market. And it's time for my subscribers to buy gold and gold shares.

    Question -- Russell, I see there's a record short interest in gold on the part of the commercials. What do you make of this?

    Answer -- A lot of these shorts are probably shorts on the part of dealers, and still other are simply shorts on the part of gold skeptics and brokers. It doesn't matter, what we're seeing is a massive amount of shorts

    I believe these commercial shorts are on the wrong side of the primary bull trend of gold. Thus, they could be squeezed out of the market, forced to cover. In other words, I believe the commercials could lose control of the gold market, something that has not happened in a long time.

    TODAY'S MARKET ACTION -- But first FLASH! speaking today,Greenspan says he doesn't "feel" like there a housing bubble (violin music). Remember when Greenie didn't think there was a stock market bubble? Greenie, get with the program, stop dreaming.

    I thought the market looked awful today. This market's going down on no news, which is the worst kind of decline.

    My PTI was down 6 to 5284 with the moving average at 5321. The huge head-and-shoulders top in the PTI is breaking down.

    The Dow was down 97.50, again under the 9978 or 50% level -- Dow closed at 9939.92. There was one mover, MSFT down 2.07 to 50.05.

    June crude was up .31 to 27.99.

    Transports down 53.34 (new low for the move) to 2643.10.

    Utilities breaking 300 and down 4.52 to 298.94.

    There were 1136 advances and 2006 declines.

    There were 65 new highs and 53 new lows.

    Big Board volume was 1.36 billion shares.

    S&P was down 18.65 to 1053.92.

    Nasdaq was down 49.57 to 1600.92 on 1.81 billion shares.

    My Big Money Breadth Index was down 8 to 804, a new low for the move and closing in on its Sept. 21 low of 774.

    June Dollar Index down .53 to 114.20. June euro up .46 to 91.21. June yen up .44 to 78.48.

    June Nikkei down 110 at 11,440.

    Bonds higher -- June 30 year T-bond up half a point to 102.02 to yield 5.60%. June 10 year T-note up 17 ticks to 105.22 to yield 5.12%. June muni futures up 8 ticks to 104.06.

    June gold up 1.50 to 311.30. July silver up 4 to 4.87. July platinum down 3.00 to 520.80. June palladium up 1.50 to 354.00. Gold inching higher almost daily.

    Gold/Dollar Index at 272.64.

    XAU up 1.34 to a new closing high of 79.90. Gold shares way ahead of gold, and I believe the shares are discounting higher gold metal.

    ABX up .44, AEM up .24, NEM up .44, PDG up .13, AU up .30,

    BGO closed at 1.12, DROOY closed at 4.63, GLG closed at 7.80, KGC closed at 2.09, MDG closed at 16.75, GFI closed at 14.68.

    McClellan Oscillator plunged to minus 11.




    STOCKS -- My 15 Most Active Index was down the full 15 to a new bear market low of 397.

    The 15 most active stocks on the NYSE today were GE down .84, PCS down 1.82, APL down .82 to 16.98, EMC down .42, LU down .04, TYC down .42, Q down .86, HPQ down .75, T down .04, SLR down .41, PFE down .28, MIR down .92, NT down .15, AWE down .71.

    A few more -- WMT down 1.33, TXN down 1.09, TGT down .87, COST down .71, TXU down .53, JPM down .68, GM up .39, IBM down .25, AMZN down .79, YHOO down .91, DIS down .40, MMM u[p .60, BBY down 2.81, KBH down 1.18, DELL down 1.36. FNM down 1.15 to 78.05 (watch this one, this is the biggie. All home building stocks down today).

    CONCLUSION -- The bear is coming out of his lair, and he's more ferocious than ever. He's been ignored and laughed at, and if there's anything the bear hates it's being ignored and laughed at.

    Listen to the reporters on CNBC, talking about this stock's earnings this or what some analyst said about that stock. They're talking about twigs bending in the breeze while the hurricane is on its way. It's surreal, it really is.

    Somebody said that on a surface level, life is a comedy. On a deep level life is a tragedy. Man, does that apply to what's happening on Wall Street now.

    It's all too much for me. I'm signing off.


    Wait, maybe it's time for a laugh. Here's a joke from Richard Perkins Sr. of Perkins Capital Management via Stephen Leuthold (hope it's OK Stevie).

    I'm received a lot of Jewish jokes recently (why are there so many Jewish jokes?), but here's one from the foitin' Irish.

    Into a Belfast pub cam Paddy Murphy, looking like he'd just been run over by a train. His arm was in a sling, his nose was bloody, his face was cut and bruised and he walked with a limp.

    "What happened to you?" asked Sean, the bartender.

    "Jamie O'Conner and I had a fight," said Paddy.

    "That little squirt, O'Conner," said Sean, "He couldn't do that to you, he must have had something in his hand."

    "That he did," said Paddy, "a shovel is what he had, and a terrible lickin' he gave me with that shovel."

    "Well," said Sean, "you should have defended yourself -- didn't you have something in your hand?"

    "That I did," said Paddy, "Mrs. O'Conner's breast, and a thing of beauty it was, but useless in a fight."

    It looks as though IBM is ready to boost its productivity (Greenspan take notice). How are they going to do it. Easy, they're firing 2.5% of their employees, over 9,000 former wage-earners.

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