February 17, 2004


As I wrap up from Paris tonight, gold is up $5, the dollar is trading near all-time lows against the euro, bond yields are flat, and stocks are up. The Fed told us that foreigners snapped up $75.7 billion in U.S. stocks and bonds in December, less than November, but still net buying, not selling. I told Strategic Options Alert subscribers today that it won't make sense, it won't be based on values, and it will be deadly for a lot of investors...but we could see a lot of liquidity move into stocks in the next few months. How much? I think enough to push the market to a new high. I note that financials, as measured by the banking index (BKX), broker/dealers (XBD), and S&P financials (XLF) are all at new all-time highs. That's right. They've recouped their bear market losses and made new highs. Small caps could be next. A few weeks ago I thought this was improbable, based on the action in the S&P 100. But at the margins, in the most speculative shares, we're seeing signs that it COULD happen. If it does, it's a pure speculators's play. Institutions can't afford to be on the sidelines. And individual investors will find it very hard to resist. I suggest you do, though, unless it's play money. Keep accumulating gold shares. As I'll explain tomorrow, I think they'll do well even in a non-inflationary scenario. The posting was pretty heavy today. But it's issue week for me (meaning I'm putting together the March paper issue of SI.) So I've got a lot of material on my desk that I wanted to pass along. Now, I'm passing along to dinner. G'night from the right bank, Dan


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