The Daily Reckoning
Weekend Edition
January 29-30, 2005
Baltimore, Maryland
By Addison Wiggin and Tom Dyson
MARKET REVIEW: THE TIN HEIST
“We’ve never seen anything like it.”
Marlene Dubinsky’s Coin and Jewelry Exchange became so choked with customers one afternoon, she was forced to close her shop.
“The volume of customers has grown so much we can’t even calculate the increase,” snapped Marlene. “People are jumping on the bandwagon because they figure they can make more money by buying and selling gold and silver than leaving their money in the bank or playing the stock market.”
Marlene Dubinsky was being quoted in the New York Times. The date: January 20, 1980.
Your Baltimore-based, junior editor of the Daily Reckoning is hot on the trail of a bull market in commodities. Two weeks ago, we went to a major international seaport, and a major international coin show. Last week, the trail led us to the local library...and their archive of New York Times microfilm.
The last commodity bull market took place in the 1970s. The climax came in January 1980, with the great metals crash. Gold fell $160 in one day; silver crashed too. Commodities have been ignored as an investment ever since.
That much we already knew. Now we wanted to see what it felt like to be there - as if we had traveled back in time to January 1980 and placed an ear on the sidewalk. History repeats itself; by examining the final episode of the 70s metal mania, we hoped to identify patterns we could use in the future. Now that we’re in the midst of another one, these clues could prove very useful.
“For the past 23 years, this was just a quiet coin and stamp store, but within the past few weeks this place has turned into a junk shop,” said Istvan Varga, owner of the White Plains Coin and Stamp Exchange, speaking in 1980. “It’s a madhouse, what’s happened here.”
Obervation #1: The public was gripped by mania. In 1980, the bubble in gold and silver was ripe; thousands of regular people had become frenzied antique dealers. At a jewelry refiner in New York, the line snaked around the outside of the building, says the NY Times. An elderly man, hoping to sell his flatware, was quoted: “First I waited in a gas line earlier this year,” he said, “and now I’m waiting in a silver line.”
Observation #2: Dumb-money parasites tried to tap the public’s exuberance.
We noticed the adverts. The newspaper was seething with “reputable” gold coin dealers and “#1-ranked” commodity traders.
“Are you trading in America’s industrial wealth and forgetting America’s natural wealth?” asks a half-page advert in the business section. “Simple statistics prove that the profit potential is greater in commodities than in stocks. It follows - as “B” follows “A” - that where the leverage is greater, the opportunity for profit is greater. And the greatest leverage in the world is found in the commodity futures market.”
“You say you don’t know anything about commodities market?” the ad goes on, “You don’t have to. We do. When all you trade is commodities, as we do, you know commodities. For a better return on your trading dollar...get into commodities with Nelson, Ghun and Associates.”
Observation #3: The bubble pushed commodity-based stories to the front page. It must have been time to sell.
Finally, we kept finding commodities featured on the front page. Usually the stories were of a market bent. “Gold makes record high, trading is wild,” was the headline one day. At other times, the stories had nothing to do with markets...
On January 19, 1980 a gang of thieves made off with a truckload of tin ingots worth more than $500,000, reports the Times. Handcuffed, blindfolded and held at gunpoint, a 30-year-old guard, Rene Tadros, was held hostage before the thieves vanished with 60,000 pounds of tin. “The price of tin, like that of gold silver and other metals, has risen sharply in recent months, from just of $7 a pound last October 1979 to $8.44 at the close of trading Friday in New York.”
Here at the Daily Reckoning, we’d assert that a NEW bull market in commodities was underway. Don’t take our word for it though; just look at any commodity price chart over the last few years. Or listen to the experts, like Jim Rogers. “A new commodity bull market is underway and will continue for years,” he says, speaking in 2005. “I have been convinced of this since 1998, and have been making my case for commodities ever since.”
But you won’t find much evidence of this juvenile resource bull run in your weekend edition of the New York Times...even though the last five years have been great. In fact, the CRB - the benchmark commodity index - is up nearly 50% since the beginning of 2003. Last week, the CRB was unchanged at 284. In 2005, it’s up only 0.1%.
Gold, silver and oil all declined last week. Oil was off $1.62 a barrel to $47.18, while gold fell $1.30 an ounce to $425.70. Silver declined 2 cents to $6.79 an ounce.
In most newspapers, stocks and bonds are still all the rage. Last week, both markets - bonds and equities - went up...the DJIA was up 34 points to 10,427, while the Nasdaq was 2 points higher, closing at 2,036. The bond market also found support. The 30-year T-bond yield closed at 4.61%, down 3 basis points on the week.
In 2005, a pound of tin trades for $3.64...and most thieves wouldn’t even give it a second glance.
But watch out if they ever reconsider.
Regards,
Tom Dyson,
The Daily Reckoning
P.S. We were proud to learn that the New York Times relied heavily on Paul Sarnoff’s analysis of the metal situation in early 1980. He was quoted nearly everyday.
We only mention this because, 25 years later, Paul’s son, Steve Sarnoff, finds himself in an equally distinguished position. Since taking over from his father as the editor of Options Hotline, Steve has gone from strength to strength. In fact, you could say his readers rely on him. Maybe it’s because, since January 1, 2004, he has made 34 option recommendations...and 30 were winners?
A Dynasty of Profits - Risk Free
http://www.agora-inc.com/reports/OHL/WOHLF113
--- Upcoming Events ---
*** The Money Show, February 2-5, Orlando ***
Admission is FREE!
Total household debt? Consumer Spending? The Refi Boom?
Do any of these macro-indicators mean anything?
How do you make money off the REALLY BIG trends? Or...can you at all?
Don’t miss The Great Profit Debate at the World Money Show in Orlando, Fl, next Thursday. Investment heavy-hitters Dan Denning and James Boric are going to duke it out live. Denning is a big-picture macro-guy who plays options on ETFs. James, an inveterate small cap sleuth, could care less...he’s buying great companies cheap on their fundamentals - and watching them skyrocket in value.
“The Great Profit Debate” will be moderated by New York Times Best-selling author (and publisher of the Rude Awakening) Addison Wiggin. Stuck in the middle will be value seeker Chris Mayer, editor of the Fleet Street Letter. Chris has his own approach he calls: “Tangible Assets That Sweat.” Chris does just fine in any market.
You don’t want to miss it...when these guys get together for a tussle, anything is liable to happen. But one thing’s for sure, profits will be discussed...follow this link for details:
The World Money Show - admission is free!
http://www.worldmoneyshow.com/twms/agora.asp?scode=003693
*** Gold Summit II, Feb 23, Long Beach ***
We have invited the world's most experienced traders in gold to Long Beach, Calif. - including the top names in bullion (Burt Blumert), rare coins (Van Simmons), portfolio diversification (Michael Checkan) and gold stocks (Frank Holmes) to tell you their very best ideas in each category.
It is everything you need to know about investing in gold, directly from the people who've made an entire career out of trading in gold. Burt, for example, opened his shop in 1959. Van invented the PCGS grading system. Frank runs the best gold mutual funds in the world. And Mike can tell you about helping our Vietnamese allies, who were fleeing the communists, exchange gold for U.S. dollars at Eglin Air Force Base more than 25 years ago.
We have even arranged for you to get your own "dealer's pass." This allows you to go on to the floor of the show the night before it opens - where you can buy almost any gold coin that's ever been traded.
It is your chance to buy my recommended coins, or the recommendations of our experts, and take immediate delivery.
The Gold Summit II
http://www.agora-inc.com/reports/350SGLDC/F350F102
--- Daily Reckoning Book Of The Week ---
BUBBLES AND HOW TO SURVIVE THEM
by John P. Calverley, 2004
LFB Price Only $19.75
*** You Save 34%! ***
“In a low inflation world, housing bubbles are a much more dangerous phenomenon.” - John P. Calverley.
We ran an extract from this book as a Daily Reckoning Guest Essay, from whence
we took this quote.
In fact, it was the last line!
Bubbles have played a major role in the world economy over the past 20 years, first in stocks and now in home prices.
Bubbles affect us all.
John P. Calverley is chief economist and strategist at American Express Bank.
Bubbles and how to survive them!
http://www.lfb.com/cart/affiliate.php?code=10438&stocknumber=IV8934
--- Advertisement ----
Get Ready For a Shocking Glimpse... "China, 2050"
The year is 2050. China is the richest, most powerful nation on earth. And America's Golden Age has come to a crashing end. Impossible? Don't be so sure... Protect yourself now, and you can not only "China Proof" your money... you can also use these two simple investments to multiply your wealth by as much as 794%...
http://www.agora-inc.com/reports/DRI/WDRIF126
------------------------
THIS WEEK in THE DAILY RECKONING
01/28/2005 - Foolish Wisdom
by Bill Bonner
"When the crowd takes up a corrupt wish - to get something for nothing...or
to make the world a better place by killing people - the last thing it wants
is another point of view. It is already too late for that."
http://www.dailyreckoning.com/Issues/current/012805.html
01/27/2005 - Superleverage
by Steve Sarnoff
"But many speculators fail...even when armed with good picks. I think
it was Woody Allen who said, 'In life, there are pitfalls and there are opportunities.
The idea is to avoid the pitfalls, seize the opportunities, and get back home
by six o'clock.'"
http://www.dailyreckoning.com/Issues/current/012705.html
01/26/2005 - Fear Factor
by Dan Ferris
Before I tell you what the greatest single secret of investing is, though,
I want to tell you why I'm going to give it to you. I'm going to tell you this
secret because it's hiding in plain sight.
http://www.dailyreckoning.com/Issues/current/012605.html
01/25/2005 - Economic Dinosaurs
by Dan Denning
"If the American fridges are cheaper in Europe, so are the Chinese fridges.
No net competitive gain in the fridge market...or perhaps in ANY market for
manufactured goods."
http://www.dailyreckoning.com/Issues/current/012505.html
01/24/2005 - Standing Solo in the Crowd
by Bill Bonner
"On page one of the International Herald Tribune we see George W. Bush,
at his second Inauguration, whose mouth seems to have come such lofty guff
he might have been mistaken for a hospital chimney."
http://www.dailyreckoning.com/Issues/current/012105.html
----------------------
HEADLINE, NEWS And INSIGHT:
A Look at What the Future Holds
by Kevin Kerr
Over the past two years, commodities have more than eight times better than
traditional stocks...and there is no sign of this boom ending any time soon.
The future looks bright for the resource and commodities markets.
http://www.dailyreckoning.com/Featured/ALookatWhat.html
Chipping Away at American Optimism
by Rick Barnard
"In fact, I think that was what was so amazing about Dr. Richebächer.
He’s 86 years old, and he still has a fire in his eyes. As I’ve
said, he constantly watches financial news channels.
http://www.dailyreckoning.com/Featured/ChippingAway.html
The Humble Homeowner
by Byron King
"So in addition to our unseasonable winter warmth, we are experiencing
unseasonable January rainfall. Said rainfall lands upon our humble roof..."
http://www.dailyreckoning.com/Featured/TheHumble.html
--- Advertisement ---
Turn as Little as 54 Cents a Day Into $1.8 Million
Stop thinking you can’t get rich! I’ve discovered the carefully guarded secret that could help you beat the “fat cats” at their own game. This seven-step action plan is specifically designed to help you make money right away. Don’t wait another minute... discover how you could turn just pennies a day into a million-dollar fortune.
http://www.agora-inc.com/reports/PNY/WPNYF107
--------------------------------------------------------------------------------
The Daily Reckoning is a free, daily e-mail service brought to you by the authors of the NY Times Business Bestseller Financial Reckoning Day.
To learn more or subscribe, see: http://www.dailyreckoning.com
--------------------------------------------------------------------------------
MAKE YOUR OPINIONS COUNT! Visit our Discussion Board
Our writers and contributors also welcome your questions and comments.
The Daily Reckoning is syndicated in association with Online Trading Systems.
To receive a copy in your own mailbox daily, sign up here.
