It's difficult to make people believe that there's a difference between an investment for a possible profit and a store of wealth. But rich people know the difference. When a man has made as much money as he can, he starts worrying about losing that money. That's the time when he wants to own "eternal stores of wealth." Yesterday "The Scream", a painting by Munch, sold at auction for a record $119 million. I doubt if the buyer cares whether that painting will be worth $100 million, $50 million or $200 million ten years from now. The buyer knows that he owns a priceless work of art, something that will double in value in case of wild inflation or something that will be worth $60 million during the worst deflation.

Even if the dollar becomes worthless as a unit of exchange, the Munch painting will still be worth a fortune in what ever unit of money is in favor ten or fifty years from now.

All of which tells us something about gold. For over five thousand years, gold has represented purchasing power. No matter what form of money was in existence at the time, gold possessed purchasing power. Which is why many wise men own gold.

If I asked you to leave something for your great grandkids in a package to be opened one hundred years from now, would you leave them a wad of hundred dollar bills or one hundred gold coins? If you had any brains you would pick the gold coins. I'd venture that Warren Buffet would also pick the coins. Why? Because we know that one hundred years from now the gold coins would represent value and purchasing power and the dollar might not exist. End of story.

La Jolla is a wealthy town. Walking around La Jolla you note that this town is unlike most of the country. La Jolla is an isolated town built on wealth. But I have a secret barometer. I often call out to a local deli to order a sandwich. In normal times it takes 20 minutes from the time I call the order in until the time the sandwich is delivered. But lately I note that I call in my order, and five minutes later the order is delivered here. Evidently, business is very slow at the deli and my order goes out immediately.

I also hear that the La Jolla restaurants have slowed down in April -- for the first time in this recession. Evidently, what's happening in the rest of the country is finally hitting La Jolla.

www.dowtheoryletters.com

(858) 454-0481

Richard Russell’s Dow Theory Letters

PO Box 1759

La Jolla, CA 92038

17 Letters Per Year