someone's right - someone's wrong - who??

  1. dub
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    The gold game plays on

    By Peter Brimelow,
    Last Update: 12:02 AM ET Jan. 20, 2003

    NEW YORK (CBS.MW) -- Gold just finished up for the seventh straight week, at $357.20. Overbought? Maybe not.

    Mark Hulbert's Hulbert Gold Newsletter Sentiment Index measures the actual exposure to gold recommended by the letters he monitors that follow the metal. As of Friday night, it stood at 46.15 percent.

    Which is only about midway in the historic range - it goes from -31.5 percent in late 1997 to a peak of 89.6 percent, achieved when gold broke through $300 at the beginning of last year.

    Gold is now more than $50 higher -- its highest point for more than five years. Yet joy is decidedly confined.

    Hulbert, with his fascination with contrary opinion, views this as a bullish sign

    One particularly interesting gold bear is the Elliott Wave Theorist's Robert Prechter. Based on analysis of data by the Hulbert Financial Digest, he's had several runs of success in a variety of different markets.

    Prechter backs up his numerological reading of the esoteric Elliott entrails with unusually wide-ranging macro-thinking. In the mid-1990s, he supported his contention that the short skirt fashion meant speculative excess by publishing a current picture of model Naomi Campbell going down the runway in a sort of G-string, from behind. ( ..... -(:-D) .... eh!)

    At least, I think it was a G-string.

    You couldn't really see.

    Prechter said this was evidence of "a bottomless top."

    Maybe he was a little early. But, hey, who cares?

    You got the point.

    Forbes Magazine, where I then worked, wouldn't publish the picture anyway. Phooey.

    Prechter is currently making a powerful and erudite case for deflation. For 2003, he predicts "the stock market averages declining more than in 2000, 2001 or 2002."

    He's recommending "interest-bearing cash equivalents... conservative measures."

    Yet he writes, "I am a staunch deflationist but not a dogmatic one. Since I am a technician, the markets ultimately dictate my opinion. As previous reports have made clear, [Elliott Wave Theorist's] forecast two years ago for gold to rally to $360 has been fulfilled... If gold rallies another 10 percent, however, then the presumed bear market rally will actually be the start of a new bull market, challenging or negating my monetary outlook."

    Another advisor with a significant record according to the Hulbert Financial Digest has actually made the shift: Michael Burke of Investors Intelligence has officially announced the end of the bear market rally he's been skillfully riding since the summer (See my Oct. 14 column).

    Burke says "we look for gold stocks, high-yield bond funds, global bond funds, some foreign stocks, especially telephone issues, some electric utility stocks to be above average performers and to possibly buck the trend. There is also money to be made during this expected decline on the short side of the market."

    Dow Theory Letters' Richard Russell, who combines deflationism and gold bullishness in a paradoxical but recently successful way, closed his Saturday hotline with this tantalizing hint:

    "By the way, after increasing their gold shorts for five consecutive weeks, last week the Commercials dropped their short contracts by 7 thousand to 142 thousand while the small speculators (who tend to be wrong) increased their short positions by 3 thousand contracts to a total of 20 thousand... And with that thought, I'm signing off."

    Russell, 78, will be back at his computer this morning, however. He can change his mind. But it looks like the gold game may not be over.

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