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US$327 for a 1 year subscription Harry Schultz Gold We can also do spring cleaning in our gold portfolios. I've done so & will do more. It's psychologically hard to sell a loser when U feel "it will surely move up when gold does." But how far will a loser climb? Often back to your buy price & not much more. Sometimes not that much. Better to think of it not as a sale but as a switch - to transfer that block of cash onto a stronger, faster horse. I'm also buying more of the stronger shares already owned, regardless of profit/loss position or size. Although U don't want to get so heavy in one share that a fluke fall is painful. In any case, protect with stop orders if a share should break key support. I'm also placing a few orders well under the mkt, at such key supports in hope of picking up bargains during any price-purge day, like last Thurs, Fri, May 5-6. But also placing a stop under it, just in case. •• I don't advise buying Newmont now. I'd sell it on rally to 41-42. My personal favourites, based on charts: Wheaton River (WRM-T), Gammon Lake (GAM-T), Yamana Resources (YRI-T). Frankly, there aren't many! I listed 12 golds lastime that were breaking down; all have since gone still lower. So, why do I feel the gold
correction may be ending? Because some non-US$ currencies are
building hesitant base action on key support & US$ index
is in a bearish upwedge pattern. The index is distorted by the
yen so we await confirmation by an index drop to 88.50.
(note: I said lastime $ would probably top out at 91-92; it recently
peaked at 91.93; will that hold?) Also, the 120min charts show
large island reversals in the $ (to down) & euro (to up).
The targets in all these imply gold back up to 430, by which
time I hope the chart will dictate the next wave target. But
I will take at least half profits at 430, as it will be a triple-top,
which usually means a hesitation in price. Then I'll rebuy after
a convincing break above 430. If/When. I announced in GCRU
that I'm changing the buy/sell techniques, to be more user-friendly.
I'll avoid terms like: buy on strength or buy on 1-2day breakout,
in favour of buy at 13-stop. Aim to get long earlier on
breakouts but at buy-stop prices that guarantee a strength area.
Also more buy at mkt recoms. If U haven't seen a GCRU
&/or want to get in on my new strategy, feel free to join
the GoldCharts R Us family. Upgrading strategy is more
important than upgrading a portfolio. Remember U can prosper
in any mkt if U learn to trade smart. I'm trying to get
a patent on how-to-buy-low-sell-high technique. U have read that France, Germany & Italy want to sell some gold (actually they are only considering it, amidst opposition!). Captive media puts spin on it that they are "dumping" gold. Hah! They didn't fall out of love with gold. They simply need to raise money as all 3 are in violation of the EU Growth & Stability Pact, can be fined millions by EU. They also want to fund new public expenditure to soften public complaints. In any case, there's never a shortage of buyers for all Central Bank gold. But why are the buyers never given equal news coverage? On the other side of the ledger: Japan central bank has been buying gold! Why didn't the captive media report this? Speaking of media bias: The FinancialTimes violated all principles of neutrality by viciously attacking gold in their Apr 16 editorial column, as I've never seen mainline media do before. The puppet who wrote it said we don't need gold to protect against inflation "as we're in an era of low inflation." & "Gold is on its way out as an investment & a reserve asset. 3 cheers for that," he says. Not only is that badly timed & wrong data but it ignores gold's monetary role. Shame on the FT for such amateurism, bias & faulty facts. As I said in GCRU: "Gold is not in trouble but press morality is!" I suggest readers write the FT to complain. •• Many coin dealers (including friends) promote gold coins of distant nations. A word of caution: In a crisis it may be difficult to liquidate foreign gold coins vs domestic coins. If U must buy foreign (to where U live) gold coins make sure they are world class, which are Canadian Maple Leafs, UK Sovereigns, & Swiss francs, not coins from Belgium, Finland, Cuba, etc. If U are worried about confiscation or privacy, buy pre-1934 gold coins that are legally rare, but technically semi-rare & protected by law in major countries such as the US. The only 2 world class pre-'34 coins are UK Sovereigns & US $20 gold pcs. Buying anything (houses, cars, art, precious stones, diamonds) is very easy. Don't buy anything U can't readily sell. Gauge the market size/demand before buying anything.
STOPRESS: Gold shares are now weaker than bullion. The Schultz Gold Shares Advance/Decline Line hit new lows on 5/6, & 7 & lower on the year than any of the gold share indexes. Only our A/D line is able to give the total picture. A possible implication is: most golds may not have bottomed, even if bullion has. Maybe neither has, but both are at mid-2003 support levels. Tech tools odds are high that both are in bottoming process. A non-gold key is the euro. Reflects the US$ better than US$ index. Euro is also at big support. Worst case: Euro could dip to 1.15, but support is big at 1.18. Watch these levels to help U place orders & stops for gold, gold stks, currencies & stock mkts. See Uncle's Notes for a later Stopress than this one.  Big Picture
Fundamental economic evidence is always "mixed." But that's no excuse to duck my job to use my best judgement to try predicting pathways ahead. One can make a case for deflation (dead easy, due in part to China holding down prices on most WalMart type goods, & the global debt mountain). One can also make a case for inflation (also easy, due to rocketing prices in education, insurance, medical care, fuel). But U can't sit on the fence. One must try to outwit the political spinners, multi-national corp PR, paid lobbyists, & such, to discern direction -- so we can make quality decisions in all areas of life that are affected by major economic conditions. We never need fear any future event (even hurricanes) if we are given time enough to prepare. And in the financial world, a small window into the future can be very helpful. 
I have the feeling a special
kind of inflation is underway & will grow considerably. Real
inflation, not govt-sponsored statistics designed for their self
interest to deceive. It is, so far, a partly deceptive inflation,
masked by index omissions & pockets of falling prices in
certain narrow areas, & bathed in media brushes wielded by
various vested interests, & esp govts. It's already well
underway. My guess is it will last for 1-3 yrs. Following
that, deflation, fed by the current undercurrent of deflation,
which will grow substantially. Its probable destiny: deep recession
& potentially depression. Our cartoonist has attempted to
picture this potential scenario. It's meant to show the flow-of-events,
with the year-labeling a rough calculation. (I reserve the right
to be wrong 1. Almost all world govts have historically big debt problems. They don't want to raise taxes to solve them. In the words of Canadian econometrician, Dr Martin Murenbeeld, at a forum in Zurich recently: "Govts would rather print money to pay the bills than face the backlash if they renege on promises, cut benefits or try to raise taxes. In that scenario gold gains rapidly against all major currencies, as govts try to inflate their debts away." 2. China growth rate, recently at 9.7%, has momentum that probably can't be stopped, though Beijing speaks of a desire to cool it down. Privately, most don't want it, IMO. Any slowdown would be mild & brief. Here's what just happened; U probably won't read this elsewhere. A WSJ story around 4/20 gave the mistaken impression China had clamped down on bank loans. It was a fluke (a damaging one to the gold & commod mkt). UBS in HongKong discovered the truth: "A number of Chinese commercial banks reported receiving instructions from the China Banking Regulatory Commission (CBRC) to impose a moratorium on new credit issuance prior to the May 1 holiday period. As a result, many bank branches in various parts of China reportedly ceased all credit operations. But, yesterday the CBRC issued a succession of statements stating there was no credit moratorium in place. "According to the regulators, CBRC contacted banks & issued 'guidance' asking banks to exercise caution in lending, & in particular not to move forward the timing of loans to before the May holidays. There have been a number of rumors of policy adjustments to come immediately after the holidays, & the CBRC was worried that banks would rush to get all new projects in before then, thus distorting the April credit growth figures." In other words, the whole event was a Laurel&Hardy comedy of errors. The govt just wanted to smooth out the figures & the banks wanted to register new loans before the rumored new govt-imposed rules. Rumor led to rumor & fear of a slowdown which freaked out commodity traders who decided to take fat profits in sharply rising commodities of every kind. A case of mistaken identity. It was fear of a Chinese-takeaway of the punch bowl by chop-chopsuey traders. • PS: Morgan Stanley analyst Andy Xie in HongKong has written a misleading report on the China "crackdown" that is a lecture to Beijing, not an accurate news analysis. Ignore it. UBS got it right (above). •• That aside, China's inflation rate is also breaking out, which it will pass on to the world via slowly rising prices. China producer price index rose at annual rate of 3.2% in Jan, & central bank speaks of raising interest rates "to counter rising consumer prices & investment growth." Some economists forecast 5% China inflation before yearend. Monetary growth rate: 18%. China is part of the inflation picture. 3. Commodity indices have been racing ahead. They took a detour on 4/28 when China's premier announced he may cool things down, but the commodity correction underway will be short, if sharp. Commods were due for a correction anyway. Aluminum recently hit 8 1/2-yr high as stockpiles fall. Platinum hit 24-yr high on 4/13. Copper 7-yr high. When commod prices were at their lows in 2001, so was the capacity to produce them. That's part of the law of supply & demand. U can't increase capacity quickly, takes years. Look for commods to correct during all US$ rallies, partly because many commods are priced in US$. •• China has been gobbling up world's resources like a hungry dragon -- 7% of world oil, 27% of steel, 31% of coal, 25% of aluminum, etc. If global demand remains fairly strong for Chinese goods (it will, via Walmarts of the world), as well as commodities (aided by shortages in many commodities/metals), there is no reason commod/metal prices will suffer more than a mid-course correction. There is constant upward pressure on world prices, not just on the raw commodities themselves, but on all the products that are made from these commodities. Keep eyes on the main trend. Rising commods are another part of the inflation picture. PS: oil, due to wars as far ahead as I can see, & political upheaval & militant violence, insures that oil will rise for years, the Achilles' heel of world economies. $55 soon. 4. Realities: Why doesn't the US Consumer Price Index (CPI) reflect this? Good question. Easy answer: CPI has only 7% reserved to measure all commodities! Stupid? Yes, but sir, this is govt! If U add a new roof to your house, that is included, but not a 40% rise in copper. How many new roofs have U put on this year? 6? Good man! Govt inflation indexes are deeply flawed. In the UK, the Bank of England has been asked to target a price index that excludes both house prices & council taxes, which are rapidly rising costs. In the US, food & energy are excluded. (U don't eat or drive, right?) And the core inflation measure is at a low level; yet this core measure has a 38% weighting for house rents, but zero for house prices. •• Despite distortions (Klingon-cloaking), the Core CPI annual growth rate broke upside from the 1992 downtrend, from a triangle chart pattern, pointing to aprox 6% CPI annual growth in due course. That's big time inflation for the Core sector! •• FT columnist Philip Coggan notes remarkable similarities to 1970's (in Vietnam era, with govt guns&butter policy). A current account deficit emerged due to competition from Germany/Japan. US devalued the $ (via Bretton Woods system). Germany/Japan accumulated huge currency reserves; money supply soared. Commod prices started to rise, leading to general inflation. Substitute China for Germany & the parallels are striking. Add another similarity: central banks switching from fighting deflation to inflation. Where CB policy errors are made they will intentionally be skewed toward inflation. 5. Interest rates are rising -- where it matters, in the mkts. Govts will, as usual, tag along behind & raise rates officially, one by one (UK & Oz have started). This is the tail that wags the dog. The US 2yr yield recently rose to its highest in 18mos. Fed officials are on record saying interest rates must normalize. As a rule of thumb, a neutral level for Fed funds rate is about 2% over inflation. With core at 1.5% this involves the rate moving from 1% to about 3.5%, a move similar to that seen in the frantic 1994 period. •• The Economist's cover blares: "The end of cheap money." Sums it up well. Interest rates in US-Japan-EU are lowest in recorded history. A watershed passed. Bye. 6. My friend Alf Field sent me, by coincidence, his R&D on deflation just as I reached this point in writing! Alf has advised on mkts for 30yrs. He notes many have recently written of a deflation threat, eg, J.Taylor, John Exter, R.Russell, Geo Paulos, R. Prechter, N.Hultberg. Alf says "No deflation, but maybe worse." He cites the absolute requirements for deflation, which are not present today. He says we're not just moving to inflation but "inexorably toward hyperinflation -- the bankruptcy of the currency option. Excessive debt can be repaid by either bankruptcy of the debtor or the currency. The former is eliminated by removal of the deflationary alternative." Read his article in full on www.gold-eagle.com. Alf direct at ajfield@attglobal.net. •I suspect that if the US came faintly close to hyperinflation, a global currency crisis would result & foster a new Bretton Woods pact to find stability. Possibly via a gold-backed euro-standard to replace the US$ standard. ••• Ask anyone
what they think the inflation rate is in their country in terms
of their personal cost of living. Most say: "about 10%."
That's about right. U should always add at least 6% to
whatever (vested interest) govt figure U see for inflation rates,
to reflect reality. That is, unless U plan a new roof every year.
If so, how to invest?
Real estate (well located), Japan R.E. property trusts, Japan
small cap stocks, all precious metals, natural gas, coal &
copper stocks, very selected oil stks, most commodities, quality
art, rarities of all sorts (if volume good for resale), certain
inflation-proof stock sectors. What not to own: bonds over 2yrs
(only 90-day is safe), US$'s, interest-sensitive stocks (eg,
utilities). ••• In 1,2,3 yrs (if inflation soars)
I'll try to time the sale of most of these areas before a price-crash
& deflation set in-though gold will fall the least (&
thus be relatively strong). It's going to be a whirlwind
6 years, with huge profits possible, if U sail with the
wind & change course as required (or huge loss of buying
power & nest egg if U don't). Meantime, I'll fine-tune this
BigPicture from one HSL to the next as required. ###
The
Letter for Millionaires -- current & prospective (& former) |
