-->Harry Schultz on stocks, gold and the flu

By Peter Brimelow, MarketWatch
Last Update: 7:03 AM ET Oct. 31, 2005

NEW YORK (MarketWatch) -- Friday's fierce fling, bucking a multi-week mushy market, has created considerable confusion. But two veterans remain in the cautious camp.

Dow Theory Letters' octogenarian Richard Russell, quoted here yet again because of reader demand, has been growing increasingly alarmed recently.

Russell shrugged off Friday's bounce as"overdue," noted the previous few days' volatility, complained that in his experience this sort of volatility"goes nowhere" and -- very unusual for him -- took the weekend off, apparently in dismay and disgust.

Helping fill the void, on Sunday an issue of International Harry Schultz Letter made one of its irregular appearances. Schultz is vague about his age (and much else), but he's a contemporary of Russell's and has also been publishing since the 1960s. Issues of his letter are idiosyncratic -- and, as with Russell, difficult for the Hulbert Financial Digest to construct model portfolios from -- but they're always an interesting read.

Everyone knows that paranoids have enemies, but some have nuanced viewpoints as well. Schultz was one of the most apocalyptic of gold bugs in the 1970s. But he baled out quickly after gold's 1980 peak, although maintaining that this was purely a trading move, and he still shared the gold bugs' aversion to central banks, etc., etc.

Similarly, Schultz shares the widespread view among gold bugs (Russell among them) that their hour has finally come again.

But as we noted back in August 2004, that didn't stop Schultz from cautioning against those bugs who were calling for"$500 any day now."

Unlike Russell, Schultz has not happily transitioned into the e-age (his latest letter repeatedly complains about e-mail and wistfully adds that snail mail is still the most secure), meaning we don't know exactly what he thought of Friday's flip.

But his letter is distinctly bearish on the medium term, but not dramatically so:

"Storm clouds are brewing in global stock markets with the Dow Jones World Index showing a breakdown from the March 20003 bearish upwedge and potential 10-month megaphone top. Current oversold conditions may produce a rebound, but it's unlikely to rise above recent September peaks/resistance.

Unlikely that 7,140-7,250 intermediate support in NYSE Composite will hold anything more that a short-term bounce before price heads down towards MAJOR under-market support as 6,900." The NYSE Composite benchmark ended Friday's action at 7,369.55.

Schultz's latest letter shows definite signs of 1970s-style doomterism -- raising, for instance, the specter of"gorilla-size inflation in the U.S." and even of a renewed drive by international elites --"the Trilateral Commission appears to be a key string puller but above them is another coterie/group" -- to consolidate currencies and establish a world government.

To go along with this, Schultz says gold is in the classic second stage of a bull market ("cautious acceptance"). He adds:"It should run for several years with, numerous sharp rallies and scary corrections (up to 50%). It will be a trader's paradise..."

Note carefully, readers: up to 50% corrections!

Here is Schultz's gold summary, delivered in chartist jargon:

"Technically, the chart is poised within $2 of a breakout, to $477, which would kill off the head-and-shoulders top pattern that (if it breaks down) could see a slide to 450, even 440. That would postpone the otherwise pending rise to 500. If you see 477 in the next few days, take it as a buy signal. Conversely, a close under 470 may bring in selling to test the 461 neckline, which if broken takes us to 450, or 440 worst case."

Gold closed Friday in New York at $474.80 an ounce. See full story.

Schultz concludes:"Ultimately, gold will be illegal to own, again, in the U.S.... U.S. readers should own some of your gold in coin/ bullion form on deposit in banks OUTSIDE the U.S., e.g. Canada, Mexico, Switzerland, U.K., Australia, South Africa, Hong Kong, Singapore."

Still, Schultz isn't all gloom. He throws in the comforting opinion that"we can't have a 1918 [flu epidemic] repeat as it was so very bad due to unsanitary conditions of the times."

He recommends using colloidal silver spray, whatever that is,"for sniffles or ANY unhealth."


mein Zusatz: To Whom It May Concern!