Markets: News  

Peter Brimelow

Dines in the doldrums

8/20/12 2:18 AM ET (MarketWatch)Print

NEW YORK (MarketWatch) -- A specialist in Big Ideas doesn't have any right now. Maybe that's a good sign

James Dines, octogenarian editor of the Dines Letter, has a long, wild and woolly record, alternating between triumph and disaster, always boldly and sweepingly imaginative. (For more details, see March 26 column.)

Right now, however, Dines is in the doldrums. He doesn't seem to sense anything big happening in the stock market or in his trademark gold market. Which is kind of relaxing, in a way.

On stocks, Dines writes: "We've been challenged by mystifying markets before, but this one is a stand-out, and our instinct is to be cautious and alertly wait for the proverbial bent blade of grass as a giveaway clue. This has not been a good year for the daring, so far, but the wheel turns."

Dines may be thinking of himself here -- he's down slightly on the year by Hulbert Financial Digest count, after a promising start.

One bent blade of grass that has Dines' attention right now: "As we peer at the progression, we worry that we might have missed a market bottom on [June 4], and would be unconsoled by the truth that nobody predicts the future correctly every time."

On gold, Dines maintains the "Long-Term Super Major Buy" signal he gave over 10 years ago, although he envisages that a correction might go as low as $1,200.

He writes: "Gold bullion in congestion areas around $1,500-$1,890 for nearly one year now. Short-term neutral; new buy would be triggered by a possible rise to $1,750."

Dines still toys with some Big Ideas. For example, he is negative on China: "We expect a hard comedown because China's real-estate bubble has yet to be fully liquidated, and expensive environmental concerns are finally being attended to."

"Furthermore, China's labor force is inexorably awakening from its coma induced by the yoke of Orwellian state-controlled unions. … Our last TDL's prediction of 'China's Coming Crash' still stands, and we will be watchful for its next cyclical upturn reflected in key industrial commodities prices (iron ore and copper)."

He continues to take the threat of war in the Middle East very seriously indeed. (See May 28 column.)

He writes: "Gas-mask sales in Israel are soaring, and we wonder what they know. A sudden attack on Iran might have a startlingly quick impact on stock markets."

And he is showing cautious interest in real estate: "Real estate has come down hard, but since it is not fungible, a number of bargains are emerging. … Real estate at the right price, if distant from greedy politicians, is OK for the long term."

Thus Dines maintains the apocalyptic outlook common among veteran gold bugs, but like other survivors of gold's boom and bust 30 years ago, he has immense respect for the authorities' ability to patch up problems short-term.

He writes: "We believe that the world is in our long-predicted 'The Coming Great Deflation,' and prices have indeed been coming down. But if QE3 is implemented by either party, the risk of hyperinflation would increase, which could end the deflation and suddenly wrench prices of goods far higher."

"Nonetheless, we like the wealth-in-the-ground of some mining stocks since the lower they go, the cheaper they get, and we're preparing to add new recommendations as this market continues to throw out the babies with bath waters."

Much of Dines' current issue is taken up with a public-spirited analysis of the world financial crisis and his proposed solution: a gold-backed currency, perhaps supplemented by a silver-backed one.

He concludes with his characteristic eccentric grandiosity: "Will our recommendation be accepted? It never has been in all the time we've devoted our career to that goal, so it's clear to us that the world has not yet suffered enough to 'get it.' It eventually will.

"Meanwhile, as security analysts, we must take it into account and recommend some gold and silver to long-term, patient investors. We will have left behind the blueprint of more on the currency solution in our 'Goldbug!' book, and we ourselves are now in the High State of Detaching From Result."