Richard Russell is still in the hospital and he is cutting down on his writing to three days a week. He offered the following GOOD ADVICE today: Holding stocks here is a sure ticket to a smaller bank account. People cannot take it into their psyches that this is the resumption of one of history’s great bear markets. Our salvation is bullion gold. The gold mining stocks are also doing beautifully.
I was rummaging through one of my drawers and came across my October 2009 Miles Franklin Report. It is the hard copy that we mail out every other month. I was curious to see how accurate my forecast of the future turned out and what the markets looked like just eight months ago.
The USDX Dollar value was 76 and I predicted that the Dollar would continue to fall. Well, I missed this one by a mile. The Dollar is currently pegged at 85.61. I failed to see the troubles in Europe and the near-collapse of the Euro. The Dollar’s rise can be explained by the Euro’s fall.
The money supply (M-3) had been rising steadily since 1971 and I predicted that it would continue to rise. I sorta missed the one too. I failed to anticipate that the banks would stop lending and use their deposits to buy Government Bonds.
I showed two graphs, gold in Dollars and in Euro. I wrote that I expected gold to rise against both currencies. Gold was priced just under $1,000 and now it is around $1,250 and $1,300 in our sights shortly.
Gold, priced in Euro came in around 775 and it is currently at 1,000. Chalk up two wins for me.
I also discussed the Dow: Gold Ratio. It was 9.8 to 1 at the time and today it’s 8.2 to 1. Remember, it was as high as 40.6 to 1 in 1999 so gold is continuing to outperform the stock market, even though the market has been, until recently, in a strong uptrend for a year.
I guess I do better with gold and silver than I do with the dollar and the money supply. The real surprise is that gold has continued to perform well IN SPITE OF A RISING DOLLAR AND A SHRINKING (NON-INFLATIONARY) MONEY SUPPLY. Wait until the Dollar starts to retract, and it will, and wait until the money supply starts to swell as a new round of QE is rolled out. Then, gold will really take off.