Anstelle von fünf Börsen-'Heftli' einmal Richard Russel's Tageskommentar.

verfasst von Emerald, 17.05.2003, 16:09

-->weil er uns allen in Kürze die Wahrheit her-schreibt, wie sie ist:
Sein Kommentar für die Abonnenten vom 16.Mai 2003 nach N.Y.-Schluss.

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viel Vergnügen beim Lesen wünscht Euch: Emerald.

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May 16, 2003 -- Bear markets are tricky. Bear markets are deceptive. Bear markets don't work like bull markets. Rallies in bear markets, unlike rallies in bull markets, may or may not provide a forecast of"better business ahead."

The all-time classic US bear market rally occurred during late-1929 to early-1930. That rally followed the shocking 1929 collapse, and that rally was a barn-burner. In just five months the Dow recouped 52.4% of all its 1929 losses.

Did the great 1929-30 recovery rally offer a prediction of better times to come? Hardly, because following the great rally which ended in April 1930, the nation slumped into the worst Depression in US history.

When a cat is dropped off the thirtieth story of a building, it hits the ground and is killed, but it bounces higher. That's a nasty comparison, but it illustrates what analysts call a"dead-cat bounce." A dead-cat bounce is what we see in many bear market rallies. The market simply rebounds or bounces -- a reaction to the previous bear market decline.

Now I'm not saying that we're seeing a dead-cat bounce at present. I don't know it that's what's happening, and either does anyone else. I'm merely indicating that bear market rallies can be very deceptive in that they may not be a prediction of an improving economy.

Today we hear that Consumer Prices fell 0.3 percent in April, the biggest drop in 18 months. This followed yesterday's news of the decline in the Producer Price Index.

We also hear that housing starts declined 6.8 percent in April, which was the slowest pace in a year. That occurred amid continuing job losses and rising pessimism on the part of US workers and consumers.

All the dreary emerging data suggests ever more strongly that the Fed will be opening the monetary flood gates wide while probably dropping rates another quarter to half a percent.

Following the April 28 week's surge in the broad M-3 money supply (up $54 billion), the week ended May 5 saw M-3 swell another $29.1 billion. That's an increase of $83 billion in two weeks or at the rate of $2.1 trillion a year. With total M-3 at $8.67 trillion, the Greenspan Fed is now increasing the broad money supply at a mind-blowing annualized rate of almost 25%.

In the old days, we all used to stand around the D-J ticker on Thursday just after the close to see the latest money supply figures. In those days we would also get the velocity numbers, or how fast money was turning over. We don't get the velocity figures any more (why?). Velocity shows how fast the money is being used or how fast it is turning over.

If the banks are not making loans, if the money isn't turning over, then the banks just buy bonds with all that surging liquidity and they wait for some action. That may be what's happening now. I look at my computer screen, and I see that the June 30 year T-bond is up again to a new high. What is this? Is it the banks buying bonds?

My friend Gary Shilling has been the"rightest" of all the analysts I read. Gary is talking about net deflation of 1% to 2% coming up with interest rates on the 30 year T-bond down to 3%. Wow! And I don't discount Gary's predictions.

I continue to believe that the Achilles Heel of this market is the dollar. As I write this morning the June Dollar Index is down a big.90 points to a new low. The June euro is up 1.30 and the squeeze is on Europe and its exports, since the rising euro is pricing European exports out of the market. Germany is in recession and Italy is following while France is in not much better shape.

Today we have the world's second and third largest economies, Japan and Germany, in recession -- and the US on the verge of deflation. The central banks of the world have only one solution -- inflate, drop interest rates, and inflate some more. And all the while the bull market is gold is building a bigger and bigger base. In the face of a blizzard of fiat currency, ultimately, people will turn to real money -- gold.

Question, so far, what have the frantic inflationary efforts of the Fed done for the US? Two things -- created a bubble in real estate and created a bubble in bonds. All bubbles eventually burst. If the bond and real estate bubbles burst, it will not be a pleasant"pop," believe me.

Of course, the great danger of deflation is that deflation makes debt more difficult to carry. The US is saturated with debt in every sector of the economy from consumers to manufacturers to real estate to service. The US economy could not be in a worse position to deal with deflation if it arrives.

Bear markets have a habit of attacking the weakest sector of the economy. The weakest sector of the US economy, as I see it, is the outlandish levels of debt.

Turning to the stock market, I've been asked about the recent rise of the D-J Transports above all peaks going back to it's August 22 closing high of 2463.96.

But against the better Transports action, the Dow has failed to better any of its preceding peaks, its August peak of 9053.64, its December peak of 8862.57, or its January peak of 8842.62.

Thus the Dow has persistently failed to confirm the better action of the Transports. These are serious non-confirmations.

The non-confirmations by the Dow make up what I call the bearish secondary market picture.

The near-term picture involves the severe overbought condition of the market. I've concentrate on the McClellan Oscillator and its extended span above the zero level. Next week will be the ninth week in which the Oscillator has held above zero. Frankly, I'll be surprised if next week doesn't see the Oscillator below zero. The Oscillator is a function of the market breadth, meaning that in order to sink below zero on the Oscillator we must have days of negative breadth.

For your information, we have net seen a single day since April 20 when there were as many as 2000 declines as against advances on the NYSE.

In the meantime, gold creeps laboriously higher. June gold now seems"established" in the above-350 area. Yesterday was interesting but typical action. Gold was up as much as 4.50 during the day. Then in the last hour selling suddenly came in and June gold ended up only.30."Gosh," I mused to myself,"It's almost as if somebody doesn't want gold higher." Manipulation? Nah, just sellers coming in near the close.

Nevertheless, the primary trend of gold is bullish. The primary trend will slowly and surely"eat up" all those who oppose it. The primary trend of gold will continue in force until the power of gold fully expresses itself.

Is Alan Greenspan aware of the relentless power of the primary trend -- and how the primary trend works" I honestly don't think he does. If he did, I have no doubt that he'd have retired a year or so ago as our beloved all-powerful"Maestro."

TODAY'S MARKET ACTION -- A drowsy day, but don't kid yourself, this market is weighing carefully the odds of the nation sinking into deflation.

My PTI was down 2 to 5276 with the moving average at 5247. PTI remains in its bullish mode.

The Dow was down 34.17 to 8678.31. Very unusual in that not one of the thirty Dow stocks changed as much as a point today. Remember, the Dow has failed so far to confirm the new Transport high above last August's high. What we see in the Dow is a long series of declining peaks. This could be a dangerous market -- nobody's talking about the persistent weakness in the Dow or the failure to confirm.

June crude creeping higher, up.40 today to 29.14.

Transports were down 17.48 to 2419.31.

Utilities (this is where the yields are) were up 4.43 to 235.08. I like EDE, SO, ED, TE, KSE, PEG DTE, and I've noted these stocks repeatedly.

There were 1675 advances and 1601 declines. Up volume was 54% of up + down volume. Breadth is being helped a lot by the numberous rising closed-end bond funds and preferreds on the NYSE.

There were 244 new highs and only 3 new lows. My High-Low Index was up 241 to minus 4467.

Total NYSE volume was 1.50 billion shares.

S&P was down 2.37 to 944.30.

Nasdaq was down 12.05 to 1538.53 on 1.75 billion shares.

June Dollar Index down a large 1.23 to a new low of 94.18. If the dollar contnues to fall, it's going to force interest rates up. Foreigners will dump US holdings if the dollar continues its swan dive. June euro up a huge 1.77 to 115.65, and if this keeps up European exports are going to like mighty expensive. June yen up.37, and Japan isn't happy about this either.

Bonds surging. This whole market picture has become an interest rate play. I've said all along that I wouldn't buy a stock that didn't pay a dividend (gold stock excepted).

I've stressed that the operative word in this bear market is going to be INCOME. Everybody's going to need INCOME. And you can't get it unless you buy long bonds or utilities or preferreds or REITS (I prefer bonds and utilities).

At any rate, the June 30 year T-bond shot up 27 ticks to a new high of 119.08 where it yields 4.44%. June 10 year T-note was up 19 ticks to a new high of 118.01 where it yields just 3.46%.

Analysts have been calling"the top" for bonds for months, but these analysts never understood deflation, and they never understood the huge demand for INCOME.

June gold was up 2.10 to 354.90. July silver up 1 to 4.79. July platinum down 6.60 to 645.90. June palladium up.70 to 159.85.

Note again that June gold was up to 357.40 earlier today, but later in the day"someone" came in with sell orders, knocking gold down to close at 354.90 -- but still up 2.10. This kind of strange action obviously makes the gold shares nervous.

Gold/Dollar Index was up a large 7.10 to 376.80 and very near its previous high.

Gold advance-decline line was down 5 to 1134.

XAU down.52 to 71.71. HUI down 1.70 to 135.14.

ABX down.11, AEM down.20, DROOY up.0 6, GLG down.14, HMY down.20, MDG up.15, NEM up.15, PDG down.14, RANGY up.28, RGLD up.32.

STOCKS -- My Most Active Stock Index was down 1 to 206.

The 15 most active stocks on the NYSE were -- LU up.10, NT down.06 (these two are on the list every day), PCS up.22, AOL up.22, GE down.44, PLD up.43, HPQ up.33, PFE up.12, BAX down 2.04, MOT down.13, T up.61, AMR down.30 -- American Airline might still have to file for bankruptcy, C down.26, GM down.30 (car inventories now up to 100 days, used car market very weak), EMC down.04.

VIX down.66 to a dangerously low 21.01. Far too much complacency. Option-writers convinced that there's no real downside to this market.

McClellan Oscillator was down 27 to 50.07. The Oscillator closed the week exactly on its support at 50. I believe the Oscillator will break below zero new week, maybe even on Monday.

CONCLUSION -- Fed Vice-Governor Ferguson in a speech today said that the Fed is watching for signs of declining inflation, but he feels there's little chance of actual deflation -- but he emphasized that the Fed is watching, watching watching. We're hearing this message every day now from the Fed and it's obvious that the Fed crowd is trying to TALK inflation up without having to actually cut rates again.

But emerging economic statistics tell us that Fed talk is not working, and the bond market is confirming that in the clearest way it can -- by rising day after day to new record highs.

Lowry's Selling Pressure has shown us that there's been little desire to sell in this market. But the latest is that Lowry's Buying Power is now fading, meaning that the desire to buy is also fading.

And what is that Dow Theory saying? It's saying,"Careful, the Industrials are not confirming the Transports. It's saying that this market is very damn expensive. It's saying that this is a primary bear market."

And dear subscribers, that's the way Richard Russell interprets the Dow Theory.

Next week promises to be interesting. Hey, aren't they all? As a matter of fact, all of them aren't. So there!

I'll be here tomorrow with a brief rundown, plus whatever else I can think of.

Adios,

The R man.

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Are American men impotent? All I see on my web site or in the newspapers are blatant advertisements for Viagra. More recently I see ads for generic Viagra. Viagra must be bigger than aspirin.

Good Lord, are American men also incompetent in bed? From what I see in the women's magazines, I have to think so.

From this month's Glamour cover --"Hotter, Happier! Sex the Way You Want It. All the foreplay, the fun, the closeness you've been craving."

And in this month's Cosmopolitan cover --"A Little to the Left -- How to Say What You Want Without Bruising His Ego." I guess it's just the new American Women expressing their demands. Hey, we're marching towards equality. No wonder the Taliban are half-crazy with fear!!
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Hi Richard,

It seems like you may be getting caught in with the"if everybody is
thinking the same, then nobody is thinking department" with your recent bond
market comments about it being a bond bubble. Short term mini bubble,
perhaps, they happen often, but just look at that terrific chart you
provided yesterday showing core inflation and you will see that at 4.50%,
the long bond yields MORE after inflation today than when it was 5.25% or 6%
a few years ago.

And if you are correct as I think that you are about being
unable to avoid the deflation possibility, long yields should reach the
1950 to 1963 levels, not to mention the 1930 levels. You know they were
2.5% to 2.8% for the ten year period around 1952 to 1962. And if this
period is WORSE than that period for the economy as you seem to expect, bond
yields could easily go lower than those 1950 yields. Another point is this:
With 66% of money invested in equities (R Bernstein, Merrill) and about 23%
in bonds in this country, we have a long ways to go to get it back to the
near 50/50 split that existed prior to 1991.

Merrill's Richard Bernstein
raised his bond mix from 35% to 45% recently at the expense of cash at
exactly the right time. So on the path to getting back to a more sensible
asset allocation combined with the lack of wage growth and core inflation,
you may be looking too closely at the near term spike for bonds and missing
the long term grind that seems to be in progress. The search for safe
income has barely begun. Money market yields at.60% (notice the T-bill is
flirting with the 1.00% level today) and zero inflation or slight deflation
appear to be lurking out there. Thanks again.

JC

Russell reply -- Hey, I'm not arguing. I've been saying for two years that INCOME is going to be what every American is going to be searching for. And the only income these days is in bonds.

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Dear Richard,

Just read Bill Gross's May letter. He mentions the US private pension
system
is under water by $300 billion. This estimate does not include the public
sector.
This may lead to tens of billions diverted from businesses to shore up
pensions instead of spending
back into business activities. A macro factor that should keep GDP growth
below
what might otherwise be expected.

But my thought is with bond yields at these low levels and the prospects
for equities
less than exciting, we could potentially see some of these assets flow into
to hard
asset markets -- especially gold.

If, as you say, gold is the only primary bull market around, I can't
imagine the"big boys"
haven't also noticed. Though I recognize gold is not a subject
professional asset managers
openly discuss.

What is missing is the validation that gold is an"investable" asset class.
Somewhere ahead
we are likely to see a credible investment industry person (Peter Bernstein
?) write a paper or
give a speech at an investment industry gathering proclaiming the
diversification and return
enhancing benefits of gold. Of course, enough time has to pass for the
quantitative data to
reflect that gold indeed has these benefits before such speech can be
given. Much of the First Phase
of the gold bull will build these data and, it seems to me, the Second
Phase of the gold
bull will include participation by the institutions. The unfolding gold
bull, by definition, simply has to have
additional participants.

This was the pattern I observed during the long stock bull from the mid
1970's to the late 1990's.
Of course, the Third Phase of the stock bull enjoyed full participation by
the broad public.

It seems, as you have said often, the Third Phase of the gold bull will
similarly enjoy wide
participation by the public.

Time will tell....

Best regards,

Arvind S.

Russell Comment -- Looks like it's up to you, Peter Bernstein. The world is waiting.

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Russell comment -- How 'bout this below? It's about time!!


The Tocqueville Funds

The Gold Equity Share: An Idea Whose Time Has Come

The World Gold Council (WGC) launch of a gold exchange traded fund (ETF)
promises to revolutionize the gold market. It was filed with the SEC
5/14/03. After reviewing the document and considerable thought, we conclude
that the new Gold Equity Share is a highly significant milestone for gold.
For the first time in history, investors of all descriptions will be able to
invest in physical gold through brokerage firms and other mainstream
financial market channels.

Previously, investment in gold meant withdrawing
money from a brokerage or bank account in order to pay a coin dealer or a
bullion dealer. The ETF will eliminate the past inconveniences,
uncertainties, and bureaucratic hassles that have long stymied a free flow
of capital from retail and institutional investment portfolios into the
physical metal.

The WGC Gold ETF will be listed on the NYSE once it has received final SEC
approval. Each share will represent 1/10th of one ounce of gold, and at
current gold prices, will trade at around $35. More important, each share
will be backed by 1/10th of one ounce of physical gold, deposited with Hong
Kong Shanghai Bank in London. The gold will be allocated which means that
it cannot be lent to bullion dealers and/or used in the gold derivatives
trade. The introduction of a gold ETF will finally integrate physical gold
with other financial markets and thus end its isolation based on the archaic
and creaky conventions subject to which it has historically traded.

The gold market's antiquated architecture has much to do with the metal's
substantial undervaluation. By creating simple access to physical metal,
the WGC ETF will begin to freely tap capital market flows and thereby
diminish the heretofore undesirable influence of central banks on the price.
Expanding the borders of the gold market beyond the collective mentalities
of central bankers, bullion dealers, derivative traders, commodity funds,
and jewelry buyers, Middle Eastern souks and Asian bazaars will contribute
substantially to its price.

For those who might doubt the potential significance the new Gold Share on
the metal price, look no further than the experience of our very own
Tocqueville Gold Fund (ticker=TGLDX). One year ago, the fund received
authorization to buy and sell physical metal. We did so by soliciting a
special vote of the fund trustees and by subsequently establishing complex
arrangements with various bullion dealers. Even after having taken these
steps, TGLDX is not permitted to hold more than 10% of fund assets in
physical metal because of commodity-unfriendly tax regulations. We would be
surprised if many gold sector funds have undertaken the same laborious
process. For most, the path of least resistance has often been to invest in
the shares of gold producers or in structured notes (a.k.a. gold linked
derivatives) issued by money center financial institutions.

For individual investors, the historical barriers have been even more
daunting. Very recently, an acquaintance of mine described taking a
cashier's cheque to a coin dealer in exchange for $50,000 in Krugerrands.
NY City sales tax of 8.25% was of course added to the transaction cost.
These coins were then transported by my friend via the NY subway system (no
armed guard by his side) for ultimate deposit in his basement. He has
written himself several notes as to the exact subterranean location.
While hard core gold enthusiasts may have been willing on occasion to
challenge the impediments to buying the physical metal, main stream
investors considered investment in gold to be completely off the
reservation. Even if the notion possessed intellectual merit, which of
course for most it did not, the preferred route was to invest in the shares
of generic, highly liquid gold mining companies.

Although gold mining shares appeal to those seeking their considerable
leverage to changes in the gold price, they incorporate business risks that
clash with the fundamentally conservative and risk averse reasoning that
might attract a wider audience to gold. The business of mining gold is
subject to a long list of uncertainties. These include geological, labor,
regulatory and environmental, financial, and not least, political risks
particular to host countries. In addition, gold shares exhibit all of the
volatility and then some of the characteristics of long-dated options, which
is in fact what they are. Physical metal entails none of these detractions.
In fact, the only risk to physical metal is the possibility of paying
excessively. Otherwise, gold bullion is the safest asset in the spectrum of
investment alternatives.

The same cannot be said for the gold linked structured notes (derivatives)
issued by financial institutions such as money center banks or investment
houses. These instruments are backed not by gold but by the credit of the
issuing institution. They are easy to buy and next to impossible to sell.
The credit of such issuers has been suspect of late.

Will the gold ETF divert capital from the share market and thereby lower
valuations of the entire mining sector? On the one hand, those wishing
exposure to gold will feel less compelled to configure their entire position
in the form of shares. In this regard, the market for gold shares might
contract. On the other hand, a gold ETF will broaden the potential
population of investors to those who see gold as a portfolio diversifier.
For example, large pension funds that must operate with 20 to 30 year time
horizons, have to date evidenced only a minuscule presence in the market for
physical gold. Surely, the long term financial insurance represented by
gold bullion will appeal to many of these fund managers. The speculative
aspects of gold investing are less important to these investors than
protecting capital during periods of extreme financial market stress. A
gold ETF will significantly broaden the eligibility and appeal of physical
bullion as an investment class. The resulting revaluation of gold to a
permanently higher level will in turn expand the entire market cap of the
mining sector.

The market capitalization of the gold mining sector is a relatively tiny
$50-60 billion. The"market cap" of the amount of physical gold available
for investment, excluding central bank holdings, is very approximately $ 1
trillion. Even after making the extreme assumption that all central bank
gold is in play, the investment gold market cap is only $1.4 trillion.
World financial wealth in the form of bonds and equities exceeds $50
trillion. An allocation of only 1/10th of 1%, (by the way, a much smaller
allocation than we are recommending) would equate to 5000 tonnes of physical
metal, the equivalent of two years' supply of newly mined gold. Such an
allocation would in time cause gold to trade comfortably in excess of 4
digits in terms of US dollars, Euros and just about any other currency as
well.

Ample research testifies to the fact that gold is either non-correlated or
inversely correlated to all other asset classes including equities, bonds,
and currencies. Research also shows that gold tends to perform well during
periods of financial market stress. During stressful periods, the
correlation between major asset classes other than gold becomes more
positive. Portfolios designed for plain vanilla risk might not survive less
frequent but more serious risk. Efficient frontier analysis suggests that a
small (5%) allocation to gold stabilizes portfolio returns. As stated in a
recent research paper published by Nik Bienkowski of Gold Bullion Limited,
"a portfolio designed for the long-term may not survive to generate long
term performance unless it can withstand all market conditions."
No academic studies are needed to demonstrate the superiority of gold
relative to paper in terms of maintaining value throughout generations and
even centuries. Given the sorry record of paper assets in this regard, why
should derivatives fare any better? Derivatives of all kinds now total
$141.7 trillion, according to the Bank for International Settlements, and
are by far the most rapidly expanding asset class. They are fatally skewed
in that they came into prominence during the historical oasis of the last
two decades. They were conceived in a yankee-centric fantasy world of a
permanently strong dollar, low inflation, falling interest rates, and high
equity valuations. When stress tested, even in this best of all possible
worlds, derivatives have failed abysmally to provide liquidity.

Despite the fact that the gold mining industry hedge book has been reduced
by 504 tonnes (or 15%) over the past two years, the notional amount of world
gold derivatives have increased by 50% since 2001, according to the BIS, to
$315 billion. The netted amount or gross market value has increased by 25%
to $28 billion, the equivalent of one year's supply of newly mined gold. In
our view, the global derivatives book continues to be offside in a world of
shrinking gold production, declining hedge activity, and rising gold prices.
While not central to the case for a substantial rise in the gold price, the
continuing reduction of hedge books by the mining industry along with the
increasing paper claims for physical gold represented by derivatives
reinforce the prospect for volatility and instability in a rising price
trend.

Derivatives, designed to disseminate risk, have in fact become a source of
systemic risk. Interest rates, currencies, share prices, credit risks and
commodity prices are now intermediated by complex financial products which
Warren Buffet described as financial weapons of mass destruction and time
bombs that threaten the financial system. The financial markets and their
central institutions have become mega betting machines that are
indecipherable to outsiders and to participants alike. Designed to perform
in what their architects presumed to be"normal" circumstances, derivatives
will fall apart in a climate of sinking confidence.

Gold, a bystander to
the intellectual foolishness at the core of derivatives, will be welcomed by
the financial markets as a premier financial asset incorruptible by such
nonsense. It will be sought after vigorously by investment managers for
whom long term outcomes and the well being of their investment constituents
truly matter.
John Hathaway
May 15, 2003
(c) Tocqueville Asset Management L.P

Thread gesperrt

 

gesamter Thread:

• Anstelle von fünf Börsen-'Heftli' einmal Richard Russel's Tageskommentar. - Emerald, 17.05.2003, 16:09
  • Thus the Dow has persistently failed to confirm the better action of the Transpo - Luigi, 17.05.2003, 18:03
  • Erzählt mir doch mal was über die"velocity figures"! Wie kann man sich das vors - Luigi, 19.05.2003, 12:25
    • Re: Erzählt mir doch mal was über die"velocity figures"! Wie kann man sich das vors - - Elli -, 19.05.2003, 12:34
      • Re: DANKE! (owT) - Luigi, 19.05.2003, 12:36