Here is an extract from commentary posted at DowTheoryLetters.com on 30th August 2003:

I received an e-mail yesterday from a subscriber who writes (angrily) that there used to be two things in the market to consider -- fundamentals and technicals. Now, he says, there are three things to deal with -- fundamentals, technicals and manipulations. This subscriber complains that "the market wants to go down," but Fed manipulation wont allow it.

Is what this subscriber is complaining about possible? No, not in the sense this subscriber's suggesting. I don't think Fed manipulation can hold this market up. When this bear market in stocks first started, right after the bear signal, I stated that I thought the Fed would fight the bear "tooth and nail," and in this sense the Fed certainly has been "manipulating" the market. Dropping interest rates to 45 year lows and flooding the market with liquidity is obviously one type of manipulation (if you want to call it that), and the Greenspan Fed has certainly gone all-out and more in its battle against the bear.

But this is to be expected. The only surprising aspect of the whole thing is the extreme, almost zany lengths Greenspan has gone to in his battle to hold back the normal forces of bear market correction.

In the end, Greenspan will have only made the situation worse. He has succeeded in building a bubble in housing, a bubble in consumer debt, and a bubble in bonds and he's succeeded in resurrecting the bubble in stocks.

In fact, last week as Greenspan was speaking at the annual Federal Reserve conference in Jackson Hole, Wyoming, he had to defend himself against the Fed's "baffling tactics." He explained to the group that "rather than depend solely on the specific linkages in our formal models," he was drawing more on his own intuition and experience.

The Russell opinion is that following the greatest and most speculative bull market in history, we could have expected a severe and costly bear market which would have taken stocks back to great values. But because of the drastic, almost insane measures taken by the Greenspan Fed to battle the bear, this bear market will end with the death of the dollar as a reserve currency and most likely with the end to the US as the world's sole superpower.

Before this bear market is over, I foresee paper money being distrusted and discredited and the institution of the Federal Reserve not only despised but rejected. The US, today the world's greatest debtor, will no long be the world's leader, and I foresee US stocks smashed to levels not dreamed of even by the leading pessimists of today.

All the above may sound harsh, but it is what I believe lies ahead. When the normal and natural forces of the market are man-handled as they have been under the Greenspan Fed, other normal and natural corrective forces will ultimately take over. In the history of markets, the greater the speculation, the greater the ultimate correction. And the world has seen nothing like the speculation of the last eight years.

Every movement in the stock market, minor, secondary or primary -- is ultimately corrected. The "double bubble" that we've experienced under the Greenspan Fed is unprecedented in stock market history. This bear market, before it has breathed its last, will also, in my opinion, be unprecedented in its severity.

Question -- Russell, I note that many Asian stock markets are doing well, and, in fact, almost appear to be in new bull markets. Would you suggest buying closed-end Asian-oriented funds such as CHN, GRR, GCH, IGF, JFC, JFI, TDF and TRF?

Answer -- All these funds have done well, and I believe they may continue to do well as long as the US market holds together. But the world is so dependent on the US that I'm afraid when the US stock market starts to unravel it will take most of the world with it.

Question -- So what do you suggest?

Answer -- I suggest just what I've suggested all along. Gold and gold shares. But I'm making one change. I now suggest that subscribers put at least one-third of their liquid assets (not counting their home, their business, etc, just the liquid assets) into gold coins and gold shares.

Question -- Where can I store the gold coins?

Answer -- I don't know, find a place to hide them. There's nothing like the actual possession of gold with no paper of ownership between you and the actual metal. Find a place to hide 'em, period.

Question -- What if the government decides to call gold in as they did during the '30s?

Answer -- It won't happen. Look, the Chinese government is now openly and strongly encouraging its citizens to accumulate gold. Do you think the US government would move to confiscate gold from its citizens while the Chinese are accumulating gold? Do you realize the idiotic implications of that kind of move? Communist China being freer than the democratic US? No, there'll be no confiscation of gold in the US, believe me.

Question -- OK, Russell, let's say we stay with our gold, and ultimately gold goes into its bull market third phase, Gold blows off at I don't know, a price of 800 or 1,000 or 3,000. What do we do then? Shouldn't we sell out? But what do we sell for, more paper dollars?

Answer -- Whoa, that's looking too far ahead. I don't know what we'll do when if or when the gold bull market goes crazy on the upside. Maybe at that time we'll just hold the gold. Or maybe we'll sell the gold for a gold-backed Chinese renminbi or an Arab gold dinar. I'll just have to see how things look at the time. That's looking too far ahead. First things first -- for now, just build up your gold position.

Question -- You say we're still in the early accumulation phase of the gold bull market. How do you figure that?

Answer -- Read some of the e-mails at the end of this report. The public at this point doesn't even know that gold is rising in price. If they do, their reaction is "So what, who needs gold, my dentist, maybe." The public doesn't realize that gold is real wealth and that dollars are a temporary currency and not a store of value. When the public finally realizes what happening to its dollars, there'll be a panic to swap dollars for gold.

Question -- Russell, why are you so sure that this is really a gold bull market.

Answer -- Because the government of the US has put itself in a position that is untenable and unsustainable. We're spending ourselves into a form of bankruptcy. Sure, a sovereign nation with a reserve currency can't go bankrupt, but it's paper can become unacceptable to buyers from other nations.

The US today is enjoying its so-called "prosperity" solely because other nations continue to accept dollars for their goods, merchandise and services. But two phenomena say that the dollar, as a reserve currency, is doomed. The first is the trend of the dollar which in the big picture is down. The second is gold, which is now in a primary bull market. Both of these spell the demise of the dollar. When the dollar is no longer acceptable by other nations, the US prosperity will be over.

Of course, a third indication of trouble is rising interest rates. People want a greater return on their investment when they become suspicious of that quality of that investment, and as people become suspicious of the dollar interest rates will tend to rise. But here again the Fed is interfering and manipulating, even threatening to buy bonds in order to hold long interest rates down.

Question -- What of the stock market at this point?

Answer -- What we've been seeing of late is the market moving up on less and less upside volume. This can continue for a while, and it's mainly continuing with small and medium-sized stocks where it does not take a lot of volume to move these stocks higher. But it takes a lot of volume to move the big "backbone of the economy" type stocks higher, and this is where the upside volume is dropping off.

Note that as the Dow approaches the halfway level of the entire bear market decline, Dow 9504, important resistance comes in and the Dow backs off. Let's watch to see whether this phenomenon appears again if the rally continues. But I think it will take more upside volume than we've seen so far to move this market higher. Besides, the market is pushing towards overbought status now, but let's be open-minded. Remember, the market does what it wants to do, not what we want it to do.