Notes from the Investment Underground

April 14, 2009

Palermo Viejo, Buenos Aires, Argentina

Richard Russell: Why this is a bear market correction… That latest outbreak of investor credulity… 25 biggest earnings-per-share movers and shakers heading into earnings season… Banks to be allowed to screw up indefinitely… The great “too big to fail” fraud… Bailouts costing $42,105 for each U.S. citizen… Bush-Obama tag team piles on debt at the rate of $60,000 a second… Bob Higgs on C-SPAN… China wises up… And more!

*** This Richard Russell quote is a must-read for investors thinking about buying back into stocks. Russell, now in his 50th year of publishing the excellent Dow Theory Letter, believes we are now witnessing a bear market correction.

The essence of Dow Theory has to do with VALUES. At the March low the price/earnings ratio for the Dow was 25.79 and the dividend ...

Energy guru Dave Gonigam says speculators were wrongly used as a scapegoat for soaring crude oil prices in the first half of the year. But he thinks they are playing a big role in the current slump, as hedge funds liquidate their commodity assets rapidly. Dave says the supply and demand fundamentals of oil are unchanged. That is why he is still bullish crude in the long term.

This from The Daily Reckoning’s Desidooru Saloon blog:

Remember when speculators were getting blamed for high oil prices?  Remember how I thought it was bogus?  Now oil is down more than 50% from its summer highs.  And this time, I think it’s safe to say speculators have a hand in it.

It looks as if the last time I wrote about the greedy-speculator meme was July 7.  Those were the days, huh?  Those of us sympathetic to the Peak Oil crowd were

...

Gold futures closed at $906 an ounce today. The shiny metal has risen $73 in the last three trading sessions as worried investors return to the ultimate safe haven.

But this price only reflects the 'paper price' of gold, says Dave Gonigam. Holding the actual metal is much more difficult -- and much more costly.

Dave says the "yawning chasm" between the paper and physical price of gold means something will snap soon. This could mean the paper price doubles in rapid fashion.

The Daily Reckoning's Dave Gonigam says the modified bailout that is going before the Senate tonight is worse the version Congress shot down on Monday. He says raising the limit for bank deposit coverage is baffling when the FDIC can only insure 1% of total deposits anyway. That's why demand for gold bullion is reaching 'unprecedented' levels...