the dow ~ richard russell comments

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    October 3, 2003 -- Hey, the good news -- US economy adds 57,000 jobs as the unemployment rate holds at 6.1%, it's the first gain in jobs in eight months. The dollar pops higher on the news, and the Treasuries drop two points.

    The bad news - The latest New York Times/CBS poll for the first time shows more Americans critical of Bush's handling of both domestic and foreign problems.

    Gosh, you just don't know what to believe. For instance, Arnold admits to fondling women, but he won't do it anymore (I believe him), Rush has been on "pain" drugs for years, Richie Grasso was doing a bit of corporate manipulation. Honest to God, I just don't know who to believe or what to believe any longer.

    Tom Friedman in today's New York Times, writes, "Contributing to the growing sense of unease in some quarters and outrage in others is the blatant war-profiteering in Iraq by politically connected firms like Bechtel and Halliburton -- profiteering that is taking place with scandalous encouragement and connivance of the Bush administration. . . Iraq is proving to be a bonanza for the Bush administration's corporate cronies even as it is threatening to become a sinkhole for the aspirations for ordinary Americans."

    Those are harsh words. Wonder if the Bushies will sue?

    The employment news got a big bullish welcoming from the stock market this morning, and as I write the Dow is up 122 points to 9611, well above that 9504 halfway level again. Will it hold this time? Will the market pull away to the upside this time? Maybe, yes, maybe this time. Still --

    In this business, you really have to jettison your prejudices, your wishes, your hopes. Face it, the stock market is grabbing at any kind of "good news" and it seems obvious that the market wants to go higher. Thus, you either "get with the program" or you stand aside and watch the show.

    I have a lot of subscribers who are "gold-bugs" and automatically want to see the stock market go down. My advice is, "Don't mix the two." If the stock market wants to go higher (check out my PTI), fine, let it go higher and keep your prejudices out of it. By the same token, if you don't want to fool with an overpriced market, fine, leave the market alone. There's no law that says you have to be in on every move. One thing about the market, it's always there. If you don't like it today, you may like it tomorrow or next months or even next year.

    Then there are those who trade on the basis of what my PTI is doing. Many of these people are in Diamonds or Spyders, and so far they're doing fine. These are the true traders, the people who ignore everything else and operate on the principle that "the trend is your friend."

    So again, I say, "Don't let your stock opinions color you opinions about gold, and don't let your opinions on gold color your action regarding the stock market.

    Now I want to talk about something else that has me thinking, pondering and wondering. Yeah, it has to do with gold.

    Think about it -- the world sends us their merchandise and services, and we pay them with fiat dollars that costs us nothing to produce. So our overseas friends take in these phoney dollars, and they continue to sell us their goods. Why? Why? Why are they doing it?

    Easy, they're doing it so that they can continue to sell us their goods. The whole system is an unbelievable fairy tale, better known as a fraud. Reserves pile up in China and the Asian countries, fomenting inflation there. China, in fact, has a bubble problem in its coast real estate. And bank loans in China are now absurdly easy to get.

    We buy their goods and send them our home-made fantasy currency, and they take in our fantasy currency so they can continue to sell us their goods. And the big question is -- how long can this go on? And doesn't it remind you of the great fraud under Russian Communism? -- "We pretend to work, and they pretend to pay us."

    So my conclusion to the whole ridiculous situation is that it may well continue as long as gold does not surge or blow off to the upside. You see gold is the item that can spoil the game. If gold starts to surge, people are going to ask questions. The frightening question will be, "Why is everybody so anxious to swap paper for gold?" This is comparable to asking, "Where the hell are the emperor's clothes?"

    This is the basic reason why the central bankers of the world both fear and despise gold. It's because rising gold can "blow their cover," Rising gold can expose the dreaded secret -- paper currencies are just central bank paper with nothing behind them except a government's edict that "this is legal tender."

    The way things are going, I believe that the safest thing my subscribers can do is to accumulate actual gold in the form of gold coins. The speculative position, the leveraged position, is to buy the stocks that mine the gold. Take your choice, or if you want, but some of each.

    Question -- Russell, why are you talking so much about gold? Has gold become an obsession with you -- or what?

    Answer -- I like to deal with fundamentals. The fundamentals of the situation, in my considered opinion, is that gold is in a primary bull market, while the stock market is in a manipulated secondary correction in a bear market. And I always put a lot of emphasis on what I believe is the prevailing primary trend. I trust the primary trend, while I don't trust rallies in a bear markets, no matter how impressive the rally may be.

    I wrote yesterday that I thought a gold correction could be coming up, and that you had to make up your mind either to cut back or sit back. Honest, I didn't know that the gold correction would come today, so I can't take a bow for perfect timing.

    Today the powerful Commercials made their move, probably hitting every stop loss on the way down. That's the way these guys make their living, so don't blame the Commercials. They waited quite a while for this hit, and to the winner belongs the spoils, at least that was the story today.

    But this is just short-term trading, and it's happened all the way up from the 252 dollar gold that we saw a few years ago to the recent highs. This brand of action will rattle your teeth, but that's the money business. It's not like flipping hamburgers at Mickey D, you know, but in this business nobody promises us a rose garden.

    By the end of the year there will be gold ETFs available in the US and Britain (they have them in Australia now), and there will also be gold trading in China plus India opens its gold exchange today. Thus the year 2004 will see gold bullion trading freely around the world, something we haven't seen in 41 years. Did you know that India is the biggest buyer of gold.

    I'm watching the dollar. The dollar Index has been declining since September 2, and it's now oversold. So today we got a BIG pop in the dollar off yesterday's low of 92.73 on the December Dollar Index.

    What to do next? I know what I'm going to do -- I'm going to check to see what the bond market thinks of inflation/deflation. Here are the figures, hot off the press. The yield on the 10 year T-note is 4.17%. Yield on the inflation-adjusted TIPS is 2.11%. The differential between the two yields is 2.06. Back in mid-July the differential was 1.89, so the bond market sees rising inflation, not surging inflation, but slowly rising inflation. I'll keep you (and me) posted.

    TODAY'S MARKET ACTION -- A wild and crazy day. My PTI was up 4 to 5346 and the moving average was at 5310. PTI remains bullish.

    The Dow ended up 84.31, well under its early high -- to 9572.31. There were no Dow movers today,

    Dec. crude was up .53 to 30.10.

    Transports were up 41.18 to 2784.85.

    Utilities were down .15 to 253.17.

    There were 2137 advances and 1119 declines. Up volume was 74.1% of up + down volume, a pretty good up-day.

    There were 407 new highs and only 5 new lows. My High-Low Index was up 402 to 14422.

    Total NYSE volume was an expanding 1.48 billion shares.

    S&P was up 9.62 to 1029.86.

    Nasdaq was up 44.41 to 1880.63 on a rising 1.98 billion shares.

    My Big Money Breadth Index was up 4 to 728.

    Dec. Dollar Index was up .79 to 93.52. Dec. euro was down 1.27 to 115.40. Dec. yen was down .18 to 90.34.

    German DAX was up a big 142 to 3419. Dec. Nikkei was up 210 to 10930.

    Bonds were whacked hard. Dec. long T-bond was down 214 ticks to 108.28 to yield 5.09%. Dec. 10 year T-note was down 117 ticks to 112.15 to yield 4.19%.

    Dec. gold was down a large 13.70 to 370.00, below its 50-day MA, but well above its 200-day MA, which stands at 355. Dec. silver got really banged, down 26.5 to 4.83, well below its 50-day MA, and just above its 200-day MA, which stands at 4.80. Jan. platinum was up .90 to 713.50. Dec. palladium was down 1.90 to 210.20.

    Gold/Dollar Index ratio was down 1.20 to 395.60.

    One share of the Dow buys 25.87 ounces of gold.

    Gold advance-decline line was down 20 to 1268.

    XAU was down 4.28 to 88.62. HUI was down 9.50 to 189.33.

    AEM down .48, AU down 2.00, BGO down .10, DROOY down .18, GG down .60, GLG down .50, GSS down .25, KGC down .32, NEM down 2.04, RANGY down.84, RGLD down .56.

    Quite a bit of technical damage done to the metals and the metal stocks, and it's going to take time to regroup and repair the damage.

    Flash -- on the latest figures, the Commercials cut back their short position by 11,000 contracts and added 3,000 to their longs.

    STOCKS -- My Most Active Stock Index was up 5 today to 276.

    The 15 most active stocks on the NYSE were -- LU again, up .06, NT again, up .07, NOK up .14, GE up .04, PFE down .15, BVF (Biovail corp) down 6.68, F up .34, AOL down .08, C down .19, MDT down 2.44, HPQ up .77, EMC up .36, TXN up 1.01, MOT up .06, MU up .26.

    VIX was down 1.09 to 19.71.

    McClellan Oscillator was up 35 to plus 85.

    CONCLUSION -- Strong day for the stock market, and a lousy one for gold and silver and bonds. But what the heck, tomorrow (I mean Monday) is another day.

    It looked like too many people were promising "400 dollar gold just around the corner," and making money in gold and silver started to look "too easy." So Mr. Market said, "Forget it, in this business nothing is 'too easy'." And ain't that the truth.

    That about winds it up for the first week in October. Bombs away.


    I'm probably not going to write a weekend report (that's what I say now), but check Saturday and Sunday because, well, because with me you never know.

    Many thanks to those subscribers (many of them physicians) who told me how to care for my eyes.
    Russell opinion -- Arnold is the next governor of California. It's "in the bag." I voted for him, because he was the only businessman on the ballot, and he's rich (like Bloomberg in NYC) which means that he can do what he wants and be nonpolitical if he wants -- which I think he will be. Arnold notes that Calif. is very antagonistic to business, and he wants to change that above all. On that alone he's has my vote. Three cheers for Arnie.

    Arnold is also very smart. Sure he groped women. Instead of denying it, he said that "that's the way it is in Hollywood," he's very sorry, and it's behind him. So he's admitted it, he was honest, and now nobody in Cal really gives a damn. Had Martha Stewart done the same thing, her problems would have ended within a week.

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