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. Harry Schultz
Life Strategies Harry Schultz Gold
Last HSL I showed U
a 17-18yr chart illustrating this scenario, which so far has
been accurate. It predicts gold will reach a minimal $580 target
when it eventually (prob not in 2004) breaks its reverse/H&S
neckline--at 428, which I've mentioned before as the top of the
action zone. I've been a lonely gold advocate in NOT forecasting
"$500 gold any day now" for the past 2yrs or so, &
that's been validated! Fortunately, U don't need $500
gold to make money; in fact vertical mkts are higher risk, as
corrections come out of the blue & sharply. It's far safer
& easier to make money in trading ranges in any stk,
metal, fund, or commodity & as U "know" the top
part of the TR is where U sell & the bottom area is where
U buy. I said in Gold Charts R Us (GCRU)
the other day: when U are happy with the gold mkt, sell.
And each gold stk has its own indiv pattern. U should keep charts of each gold stk U own or may trade. Alternatively, get my GCRU service where I supply specific prices. But keeping your own charts (or checking them free via BigCharts on Net) is good in any case to develop a chart feel. ••• Meantime, I've cut my recommended % of your portfolio in gold from 25-35% to 20-25%. Gold isn't running away & U can make all the money U can carry by trading the Trading Range. Later, when gold breaks, or threatens to break out of this T/R, I'll increase the %. I'm also increasing my recom for bear stock funds by 5% as stk mkts look lower. ••The flipside of gold is, of course, the US$, which has seemingly built a reverse H&S pattern, predicted in last Wed's Gold Charts R Us, before the right shoulder was more than a blip. Implication: resumption of the $ rally (in the face of big $ fall on 8/6) & renewed correction in gold. At presstime we're poised at the make/break point of this pattern. See Currencies & Futures sections for guidelines. A tough call just now! ••Planning/tactics pay off in every investment, & in gold more than most.
Big Picture
Time is now a critical factor in all the above. Normally,
which US political party wins does not affect stk mkts very much;
data proves that. This time will be very different, if only because
of the multi-billions being spent Another time factor: Many US military chiefs want a return of the draft as US forces are stretched thin around the world & dangerously so in Afghan & Iraq. The Pentagon want to increase the navy by 1/3rd! Both ships & men. What men? Who will pay? Taxpayers? Yes & no. Maybe not mainly via direct taxes but partly via inflation (the renown hidden tax). Two bills are now before Congress to bring back the draft (S.89 & HR 163) for men & women. They are poised for a vote, right after the election, I'm told. If Bush wins, many will wave goodbye to sons, daughters & grand-kids age 16-24 as they're called up. If Kerry wins? Draft less likely, I'm told. ••Note: much also hinges on whether Congress stays in GOP hands or reverts to Dems. "Merlin," at the US Fed isn't likely to wave his wand to raise interest rates very much pre Nov 2, per his secret pact with GWB, which could risk some bubble-popping. Yet, the pressure from bond mkts makes that a dangerous game---keeping the lid on a heating pot. Makes for a bigger pop later. But moss-covered Merlin isn't reluctant to increase the broad money supply, M3, at $50bil a week, which will, if continued, add over $2.5 trillion in a year. My friend, ex CEO Raleigh Shaklee, believes "this almost unbelievable inflation of 'money' is likely to end or let up after Nov, regardless of election result. Reversal of the monetary pendulum will signal massive corrections in markets worldwide." He concludes: "It would be only the beginning of truly hard times. And if they do not stop the printing presses, it will be the beginning stage of hyper-inflation." I might have phrased it differently, but it's hard to fault Raleigh's directional logic. The time window is narrowing. In the few wks til Nov 2, all this may come more clearly into focus & the listless mkts of today will probably begin forming chart patterns that reveal which way the economy, stocks, bonds, metals, commodities & currencies will push. Will they form coil springs to rise or toppy patterns? In Oct HSL, I hope to be able to see & correctly analyze which way each separate mkt will jump. Between now & then U should watch prices, volumes & trends to draw preliminary conclusions. Our FMU & GCRU website updates will serve as backups for U also. Meantime, stay with all energy stocks (coal, gas, oil, pipelines, energy svcs), hold gold bullion & coins U already own, sell semi conductors & most financial svc stks, & get set to trade (not hold) gold stocks in their next stage (see inside). Tech stocks? Lighten up. Why? See US Mkt section. Copper stocks should rise after current correction, says Ed Yardini. And I agree. If U hold defense stks (eg, Boeing, Raytheon, General Dynamics, Northrop Grumman, Lockheed) watch 'em carefully. IMO, they'll be buys or rebuys if Bush wins, sells if Kerry wins. Their charts may tip us ahead of Nov 2. If polls lean more strongly toward GB, U can begin buying & increase after 11/2. If polls lean toward JK, begin selling & more after 11/2. ••Much US military spending accounting has been pushed to post-election. 2005 will see the truth & almost certainly a deficit skystreak. If so, it will push US$ to lower levels. Result: push inflation higher, along with gold & commodities. Property is a bubble, but its sell-by date will probably be delayed till the bigger inflation ahead is tamed. Property doesn't usually fall in inflations, but high int.rates can restrain it. Depends size. Use bond rally to exit bonds longer than 3yrs. Be out by USTB 104-105. Rally sucks in fundamentalists. NYTimes reports: "Rarely has a presidential campaign been this intense, this polarized, this partisan, this early. It's only July, but the battle is already joined." And rarely has the ROW (rest of world) been so interested in a US election. If they could vote they would, according to an Economist mag poll, elect Kerry ("anybody but Bush" is the usual answer) by an astonishing 94% margin. "The ROW wants a regime change in Washington" says Boston Globe. European Studies Centre, Oxford, says "If Bush loses, ROW will say this was a difficult period but an aberration from the norm. If Bush wins there'll be a long-term effect on European {& ROW, IMO} policy & development of a permanent rift between US & EU." Bush's unilateral approach to everything (from land mines & Iraq to Kyoto & world court) is the main ROW complaint. ESC says "Bush's willingness to flout int'l law will cause Europe to define ourselves against America. U will become 'the other' for Europeans." Says Kerry will disconnect Iraq from the war on terror. "With Kerry there will be dialogue, not dogma." Center for European Reform, London think-tank, says "This is a foreign policy election for the US & a defining election for the world." Americans seem almost unmoved by world opinion, but are deeply divided. The US is currently called 1 country, 2 nations. ••By the way, absentee ballots of expat Americans & soldiers will be extremely critical if the count is close. With so many military abroad, the number is large & if ballots arrive late, as is usual, the winner may not be known on Nov 2. Meantime, watch the polls, which may cast a shadow & help U make profitable investment decisions, hopefully before Nov 2. Newsbites that bite: US deficit rising its fastest since 1993. •••Pimco chief Bill Gross, world's biggest bond fund mgr says "US economy less stable than in past 20-30yrs; US$ supported by kindness of Japan/China, should be 20% lower, & they will change that support-we just don't know when." Says banks are playing the carry trade, borrowing short, lending long, things not done before. Lots of risk in economy. •••The Great Mall of China is a wild card in forecasting here. Are there 2 go-slows? China growth & US consumer buying. Or only 1 or none? It's unknown at moment. IsTGMofC thus a major cause of the mkts freezing up? Probably. (See stopress in Uncle's Notes) •Europe inflation rate
up to 2.5% (admitted) from 2.0. •••U can make
a case for anything, with selective data. So very much
is judgmental. U must fight not to pick out factors U
like. •••The struggle for perspective
is what drives Big Picture. Eg, an S&P chart in euro
currency terms, not US$'s, shows the May-June S&P rally was
been between modest & tiny. Shows how much it matters
to be tuned-in to currencies. •••US Treasury chief
Snow says the US govt is not a guarantor of FannieMae
& FreddieMac's $3 trillion in mortgages. When we get into
deep stagflation in say 2yrs, this will be the loose cannon on
the economic ship of state. Meantime, the stocks are a sell.
•••3 cheers to private enterprize for launching
a private space ship! I guess I'll have to organize an HSL
space ship for Hslms who want to take a day trip into space.
Or push off to another planet due to the pollution, politics
& fraud on Earth.
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••Of course, buy/sell only
via the bullion price is not the way to win the game. Except
for futures traders, most buy shares not bullion.
on wars-which will by admission escalate
under Bush & diminish under Kerry. The cost of Iraq is still
being kept secret by US Deputy Secretary of Defense Wolfowitz.
He dare not lie so he says he "doesn't know" the cost.
But after the Nov 2 election, those costs will need to be revealed.
I hear they will be shocking. ••The political climate
will also change if Kerry is elected, partly because it would
represent a public rejection of Bush policies. If Bush is re-elected,
the polarization will not soon disappear, IMO. In short, a political
sea-change seems possible in the US, whichever way the vote goes.
The polarization outside the US won't go away either if Bush
wins; feelings run too high.