Posted on 10/17/2005 7:59:53 AM PDT by Travis McGee
The October Newsletter The Leaves Won't Be The Only Thing To Fall! Enrico Orlandini Lasco Report 17 Oct, 2005
We're heading into that time of year where the word "crash" tends to command a bit more respect among market specialists, i.e., the months of October and/or November. Maybe it's just a coincidence, but I see an ominous cloud on the horizon. Actually, I see a large mass of clouds and they're as black as night. Anyone who's invested in the stock market over the last three or four years has little or nothing to show for it and, if you're still invested, you can't be feeling too comfortable right now. In short, a simple saving account would have been a better investment. Then again, when you buy into a market that's selling at 20 times earnings and paying a miniscule 1.75% dividend, what can you expect? Two weeks ago I warned my clients about the "probability", not the possibility, of a crash. What did I see that made me so worried that I would crawl out on a limb all by myself? Frankly, there were and still are any number of warning signals, and I would like to delve into some of them in the space provided below.
The first such warning sign comes from the market itself. Focus your attention on the following daily chart of the cash DJIA and follow along:
Lots of charts and analysis follows, HERE
Is this spam? My suspicious bone is rising.
http://www.sharelynx.com/chartsfixed/Barrons/MAI.gif
(for some reason I can't get the chart to post using the IMG SRC= tag. Because it's a .gif? )
I don't know. I think 17% return is pretty good but that is just me.
So, there is no dividend for gold but your house pays you a dividend of free rent. Glad we cleared that up.
Bull markets are always followed by bear markets.
Yes.
As for my calculations of Gold, keep in mind that Gold backed our currency until Nixon closed the Gold window. In 1971, it was statutorily $35/oz in the beginning of 1971 and was then raised to $42.22 per oz later in 1971 -- after which the gold window was closed.
Okay, so you said Gold was $35 in 1971 and $470 in 2005 for a 1343% total return but what you really meant was a $435 increase over the original $35 price was a return of 1243%. Or a return of 1013% using $42.22 as the starting price.
And when you said the DJIA was 1000 in 1971 and 10500 in 2005 for a 1050% return (really a 950% return using your numbers) you really meant 884.6 to 10500 for a 1087% return. Of course if you included reinvested dividends the DJIA would have had a much higher return than that. The dividends alone of the Dow between 1983 and 2004 add up to 2700 points, without reinvesting.
So just the cash from 22 years of dividends would bring the Dow to 13200, a 1392% return. Still want to claim gold outperformed the Dow?
Wait a couple of years, then get back to me.
By that time, the DOW should be under 9000 and Gold should be far above $500. Keep in mind, this is a secular BEAR market we are in and its not over yet :-)
I will say for the record that Gold has far outperformed any stock market index since the dot-com bust.
I expect it to continue outperforming the market indices for the next few years at the very least.
From 1/1/1973 to 12/31/1996, excluding dividends (which is a huge number compounded over 24 years), the S&P still outperformed gold.
S&P OUTPERFORMS GOLD - 97 to 02 inclusive
Yup.
ROUGHLY EQUAL RETURNS - 72, 03-04 inclusive
1972, gold wins.
2003-2004 gold loses.
I'll bookmark this so I can taunt you in the future :^)
1. To every investment there is a bid and an ask...and that's what makes a market.
2.Stocks will fluctuate. Sometimes they will fluc down and other times they will fluc up.
3. Bulls make money, Bears make money, and Pigs get slaughtered
Feel free! Though, given that we have seen five Hindenberg Omens lately and the smallest drop after that has been 7%, it may come sooner than one thinks.
All I care about is that I'm beating the market and that makes me happy. When things change and Gold becomes unattractive, I'll take my profits and run!
Some folks just can't deal with anything that deviates from the official line of "buy stocks and hold them".
Those folks probably don't remember the 70s, where not only did we have a bear market in stocks and bonds, but inflation that ravaged what little gains were to be had. Of course, if you owned gold or other hard assets in the 70s, you did quite well.
In addition to the fundamentals associated with our economy (which don't look good), historically there have been 15-20 year cycles associated with paper assets vs. hard assets. In the 80s and 90s, we saw a bull market in paper (stocks and bonds) and a bear market in things (gold and commodities).
Now things have flipped. We're in a secular bear market in stocks and bonds and a bull market in commodities, including gold. Once the sheeple are fully on board, that means we're in the last phase of the bull market and it would be time to sell. We have a long way to go until that happens. Until then, I plan to enjoy the ride!
Do you see these omens in a dream? Or in your Cheerios?
When things change and Gold becomes unattractive, I'll take my profits and run!
So when will gold become unattractive?
Most folks have a very small time horizon, that's for sure.
Which economic fundamentals don't look good to you now?
Loss of manufacturing base
Failed educational system
Debased fiat currency and corresponding inflation
Massive budget and trade deficits
Even larger future underfunded liabilities
Increasing resource scarcity
Cultural disintegration
I'm probably missing a few, but its late.
We manufacture more than ever.
Failed educational system
Okay, but not economic.
Debased fiat currency and corresponding inflation
Debased compared to what? And what is the inflation rate?
Massive budget and trade deficits
Compared to what? I know why a budget deficit is bad, why is a trade deficit bad?
Even larger future underfunded liabilities
Okay, I'll give you this one.
Increasing resource scarcity
Like what?
Cultural disintegration
Not economic.
it is interesting to note that probably 99.9% of americans today have never handled a gold coin, much less 2 or 3 at once to even have any idea of the sound they make, etc.
it is interesting to note that probably 99.9% of americans today have never handled a gold coin, much less 2 or 3 at once to even have any idea of the sound they make, etc.
I will add that the liberty eagle denominations are going to cause some heartache as well - $50 on a one ounce coin!! Ignorant people are going to believe that!!
Is this the same article from last year, or did someone actually take the time to re-type it?
For some reason, I was thinking you were the guy from Sierra Vista, AZ who gives me grief over border control whenever I mention that terrorists can charter a boat and cruise up from Mexico into San Diego any time they want. Well it's good to have a real SEAL at this website.
Its a technical "decline/crash" indicator. You can Google it yourself :)
So when will gold become unattractive?
When companies stop going bankrupt over their pension plans, inflation gets under control, the trade deficit comes into some reasonable line, we reduce our debt slightly, and there is no need for the Fed to raise interest rates.
If all of that falls into place, I'll be running from the stuff like a vampire who just met a garlic pizza.
Until then, it is QUITE attractive. Silver is even better, but that's a "short supply" play.
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