russell on gold at $556 + more

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    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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