We are in the early stage of gold bull marketCount Me Bullish on Gold - Still -- Richard Russell
Monday, January 3, 2005
Source: The Gold Report - January 2005 (www.theaureport.com)
If I'm ever consumed with bearish forebodings, I know where I can receive instant relief. I turn to the first page of Investor's Business Daily, the ultimate perma-bull newspaper. For instance, San Diego suffered a terrific rainstorm last night. I walked out to the front of my house this morning to gather the newspapers, and there I saw that one of my favorite plants, a 15-foot high Euphorbia, had toppled over and was lost.
It was a sad end to this magnificent plant. Then I heard on the radio that upwards of 70,000 people had died in that tragic tsunami, and the loss of a fine plant hardly seemed that bad.
But wonder of wonders, I picked up Investor's Business Daily and in large black headlines I read, "Consumer Optimism Roars Back in December, as Sales End Strong." My heart sang when I read that headline. Think of it, consumers still buying their heads off, consumers now turning optimistic again, sales ending strong.
"To hell with that old Euphorbia tree," I said to myself, "Hey, Americans are still buying big-time! I feel better already." With that I entered the office singing my own version of "Blue Skies."
This morning I received a Christmas card from my old friend, James Grant. Jim is one of the best and smartest writer-analysts in the business (Grant's Interest Rate Observer). . .[in] an excellent piece by James which appears in the current issue of Forbes magazine. . . James outlines the history and sad demise of the dollar, and at the very end of the article he writes, "Count me bullish on gold - still."
Ah gold, how it's frustrated its followers, particularly its most recent followers. And I've (believe it or not) been giving some thought to gold. What I think has happened is that a lot of people have bought gold for profit. Buy it at 420 and hopefully sell it at 450 or 480 or golly, maybe even 1000.
It's not going to work that way, and besides, that's wrong thinking. You don't own real money (gold) with the idea of using it for trading profits. You own gold because you are familiar with the history of fiat money. The history of fiat money is "bankruptcy." The history of fiat money is that ultimately it becomes worthless.
But the trip from non-gold-backed to worthlessness takes time. The dollar is on a downward path now, but the dollar could be around (maybe not as a reserve currency) for a few years, five years, 10 years, or longer. The history of reserve currencies is that they don't die instantly; like MacArthur's "old soldiers" they just fade away.
However, the U.S. is in a predicament. If the dollar's life is to be extended, the U.S. must spend less and save more. But if we spend less and save more, you're talking recession or worse. However, spending less and saving more may be thrust upon us. Note the news today, that the Air Force is cutting way back on its order of the new, super-expensive (quarter billion dollars a copy) "Raptor" planes.
One of the main desires of the Fed is to ward off recessions. Thus, the Fed will do as much as possible to keep the U.S. inflating, and that means a weaker dollar. And with our government assuming the task of being policeman to the world (I'm putting this politely), expenses will continue to rise.
Thus, it's difficult to envision a bright future for the dollar. This is the real reason for holding gold. To put it simply, the reason for holding gold can be stated in three words. We hold gold "just in case." One more thought -- this is early in the gold bull market. At some point ahead, the rise in gold will accelerate.
"What do we do then?" you ask. My answer -- "What we'll be doing then is that we'll probably be buying more gold at much higher prices. We'll be buying more gold because the dollar will be in its death throes, if not as a currency, at least as a reserve currency." . . .(December 29, 2004)