Richard Russell 01 (May 08 - Dec 14)

[kennynah]

If I recalled things, 2000 is when gold were the lowest. Why not use 15 or 20 years for comparison ? Why not compare gold to real estate ? Or gold to Chinese Stocks ?

And when you see a title like "the only thing you need to know", you know there's some BS coming ...

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Richard Russell: The only thing you need to know about gold and the stock market
By Richard Russell in Dow Theory Letters:

wahahahaha..... funny...

[winston]

The White House's secret plan for the dollar
Thursday, October 15, 2009

From Richard Russell in Dow Theory Letters:

Now I'll let you in on an awful secret. The US, despite all its BS talk, really wants a lower dollar. The fact is that the US is doing absolutely nothing to defend the dollar.

Of course, if the Fed wanted to defend the dollar they could halt their mass printing of dollars, and they could raise interest rates. And Bernanke could win the 800 meter race at the next Olympics at Rio.

But let's be rational - how in God's name is the US going to pay off trillions in debt? By raising taxes? Impossible. They could renege on the debt like Argentina - unthinkable. But there is a way - they'll try to minimize the importance of the debt with a cheaper devalued dollar.

That's the time-honored US way, but loyal Americans don't believe it. If they did, gold would be selling at $4000 an ounce.

[winston]

Richard Russell: How to know when to sell your gold
By Richard Russell in Dow Theory Letters:

Question -- Russell, you've been bending our ears about buying gold ever since the year 2000. Out with it, at what point or at what level do I sell my gold or silver?

Answer -- An excellent and important question. The answer (and this may not surprise you) is that you NEVER sell your gold or silver. These precious metals are an integral part of your estate and net wealth. I don't care what the current price of gold is, gold represents unencumbered wealth.

Let me give you an example from the rich man's standpoint. The rich man accumulates and holds ten thousand ounces of gold. At one point (such as today) his gold holdings are worth $12 million dollars. He's still rich.

Then gold declines to a price of $700 an ounce during a crushing world deflation. Bankruptcies rule, and the price of anything and everything with debt against it has collapsed. At this point the rich man is holding $7 million worth of gold. The fellow is still very rich. Next comes a run-away inflation and gold climbs to $2500 an ounce. Here the fellow owns $25 million dollars worth of gold. Now he's almost embarrassingly rich, at least in relation to his neighbors.

You see the point. In holding ten thousand ounces of gold, this fellow is always rich, but let's call it shades of rich depending on the economy. So the rich man isn't trying to 'beat" or "out-trade" the gold market. He holds his gold as an eternal store of wealth though good times and bad.

[winston]

Richard Russell, old-timer writer of the Dow Theory Letters, this morning had the following to say about the US Federal Reserve:

“We must never again allow a sinister group of individuals to seize control of our money system. The Founding Fathers foresaw the danger of paper money issued with no connection to gold. Moreover, it’s imperative that the discipline of gold be taught to all Americans so that the immoral concept of a Federal Reserve can never again be sneaked or thrust upon the American people.

“All Congressmen and Senators must be taught a class in money, fiat money, gold and the Constitution. The course must be mandatory. President Obama is said to have taught Constitutional law. As Obama surveys the Fed, and the results of fiat money in the US today, what in God’s name is he thinking?”

Source: Investment Postcards

[winston]

I hear two explanations for gold's rise. I think one or both are correct.

(1) Negative interest rates are a positive for gold. Inflation is now around 2%. Short rates are now around zero. Zero rates minus the 2% inflation rate gives us a negative interest rate of minus 2%.

At this negative interest rate the opportunity cost of owning gold is nothing, we're not giving up anything in the way of incoming cash to buy or hold gold. Yet gold is sensitive to the forces of inflation, and when it costs nothing to buy or hold gold and inflation is in the saddle, gold tends to rise.

(2) Interest rates alone do not account for gold's action. There's the matter of gold as money compared with fiat money. Central banks, the world over, fight deflation and recession by creating ever-more fiat currency.

This means that the ratio of gold to fiat money is rising – central banks can expand their currencies far faster than gold can be produced. As the world's total amount of fiat currencies expands, gold tends to rise.

Source: Richard Russell, Dow Theory Letters

[winston]

RICHARD RUSSELL: DO REALLY BAD TIMES LIE AHEAD?

Richard Russell, author of The Dow Theory Letters, isn’t buying the new bull market talk (read why this isn’t a new bull market here). He’s now wondering if all this money printing hasn’t created a new bubble and whether “really bad times lie ahead”:

Question, has the Fed’s quantitative easing thrust the stock market into another bubble (a bubble that can now be bursting). Consider the following: Enthusiastic investors have pushed the S&P up 70% since last March. That’s a recovery of 52% of the 2008-09 losses.

Could this have been a stock market bubble? Consider the following: Eighty-five stocks in the S&P now have price/earnings ratios over 60, based on the last 12 month’s earnings. Some examples — Healthways (HWAY) P/E 277, Skechers USA (SKX) P/E 225, Bank of America (BAC) P/E 185, Perficient (PRFT) P/E 165, City National Bank (CYN) P/E 186, and so on.

Russell notes one of the most disturbing features of this rally – it has been on nearly non-existent volume. He also cites investing legend Joe Granville, who has nailed this market. Granville is turning bearish for the first time in several years and that has Russell very concerned:

My old buddy, Joey Granville, has been terrific on this market. Joe has ridden the market all the way up since March. Joe uses his on-balance-volume studies to set him right. Writes Joe in his latest fax, “All my technical indicators are based on VOLUME.” Now Joe has turned near-term bearish and is putting out shorts for the first time in two years.

I’m guided by volume too, I’ve been warning subscribers about this market because of the high number of “Distribution Days.” These are days when the market closes down on rising volume. Distribution days are indicative of institutional selling. Here is the latest count on distribution days — 6 for the Dow and the S&P 500; 5 for the NYSE; 3 for the Nasdaq, all occurring over the last two weeks. That’s far too many, the implication being that institutions have been selling this market under the guise of a rising Dow.

In terms of the technicals, there isn’t much to like here either. The Dow Industrials and the Dow Transports have both broken their 50 day moving averages:

The sinking market is taking a lot of late-arrivals along with it; These are the poor souls who bought stocks hoping to recoup some of the losses they suffered during 2008-09. The falling stock market, I believe, will turn consumers even more sceptical and bearish than they have been. Today, by the way, the Dow and the Transports both closed below their 50 day moving average, this for the first time since last November.

Russell has lived through many bull and bear markets and he’s still not convinced this is the making of a new bull:

Despite it all, I continue to believe that since March we have been in a bear market correction, and not a new bull market. For this reason, I take the current rotten market action very seriously. If I’m correct, it this is the beginning or a top-out in a bear market rally, then I can tell you that the “fun’s over,” and the really bad times lie ahead.

What I’m now trying to decide is whether this is just a short-term correction or whether we are seeing a serious top-out of the rise from the March lows. A bearish turn of events would be an initial decline, then a weak rally and a second decline violating the lows of the first decline. In other words, a definitive downward pointing zig-zag.

The Dow has now wiped out all of its 2010 gains and now shows a loss for the year, but more about the meaning of this tomorrow. Subscribers who wondered why I didn’t want to put the bull in the box may now see my hesitation. Bear market rallies turn on a dime, and in a few sessions you can be under water. I want my subscribers to be in the best shape possible if or when this market “has had it.” A few more weeks like this one, and we could see a real old-fashioned panic.

The VIX is 22, which tells us that nobody has been buying puts. Confidence and complacency are the mood of the day. Nobody’s ready for a lousy market ahead.

That’s about all I have to spout about today. Golly, tomorrow it’s Friday. Time flies when you’re having fun. After six months of sun, now we’re having a flood. Noah, start building another ark.


http://pragcap.com/richard-russell-bad-times

[winston]

RUSSELL: HERE COMES THE “SECOND ROUND OF PAIN”

Recent action in the markets has Richard Russell growing increasingly concerned about the future market performance. He is now warning investors of an impending “second round of pain”:

“I know of only one rule that always holds true for the stock market. The market will advance to a state of overvaluation and over-enthusiasm, and this will usually identify a top. The top is followed by a long road to a state of over-pessimism and undervaluation and this will identify a bottom.

We call the extended and winding travels between these two — bull and bear markets. Most unusual is the investor who can stay invested for the full length of a bull market or the investor who will remain OUT for the full length of a bear market.

Why so? It’s because of greed that investors won’t stay out of a bear market. And it’s because of fear that an investor won’t stay in during the full length of a bull market. I’ve often likened the stock market to a living animal. It’s an animal that is scheming and fighting to part us from our money. It’s been said that never has anything invented by man been so frustrating to man as the stock market.

The remarkable thing about the stock market is that it contains the sum total of what everybody knows about absolutely everything. It’s been said the “everybody knows more than any one person.” And that’s what I find so fascinating about the stock market. The combined wisdom of hundreds of millions of people are reflected in the action of the stock market every minute and hour of each session.

The trick is to interpret the action of the market and what the action is telling us. I’ve searched for 50 years trying to find that “pot of gold,” and as far as I know, nobody has ever succeeded. It’s the eternal mystery, it’s the everlasting puzzle. The day that some genius fully understands and beats the market, that day the market will cease to exist.

I note that most analysts are now bullish, and that they are recommending stocks for the “continuing advance.” At the same time, most economists are optimistic, arguing that the “longest recession since World War II has ended.”

Typical, last March everyone was bearish and the market was establishing a temporary bottom. Now that everyone is optimistic, the stock market is topping out and the public (the amateurs) are about to receive their second round of pain.”
Source: Dow Theory Letters

http://pragcap.com/russell-here-come-th ... nd-of-pain

[winston]

When China first entered the world economic system, I remember analysts rejoiced and talked about this massive new source of demand. I deferred and wrote that we were facing a massive new source of supply. It's the Asian world of workers and suppliers and savers vs. the western world of consumers and uncompetitive businesses and towering debts.

I think of the world's central banks creating an ever-larger ocean of fiat money, money backed by nothing. When you make too much of anything, its value declines. And that's where I think the fate of fiat money lies. It will continue to fade in purchasing power.

The anti-fiat money is gold. In the end, gold will be the survivor and winner. As the currencies created by central banks lose their purchasing power, gold will gain in value and purchasing power. ngths, an industry data provider.

Source: Richard Russell, Dow Theory Letters

[kennynah]

Richard Russell ... maybe you should start carrying gold ingots to pay for your starbucks coffee....

[winston]

THE ONE CHART THAT SCARES RICHARD RUSSELL

Nothing would derail the Fed’s great reflation/recovery experiment like higher interest rates. Several notable investors including David Einhorn (see Einhorn’s thoughts here) and Julian Robertson (see Robertson’s thoughts here), have expressed their concerns over the potential for higher interest rates.

The great Richard Russell of the Dow Theory Letters has long feared a spike in interest rates. In a recent note he explained that the end of quantitative easing has bond investors worried over the future of interest rates. Russell believes higher rates are the next big move in the bond market:

“Older subscribers may remember that I said that the Fed could continue its “quantitative easing” (printing money) until the bond market says it can’t. Below is a daily chart of the 30-year Treasury bond. The bond market doesn’t like what it sees.

I view the pattern on this chart as a huge, down-slanting head-and-shoulder top with the bond sitting right on support. The bond appears weak, and if support is violated, interest rates will be heading higher. And that’s the last thing the Fed wants at this time.”

http://pragcap.com/the-one-chart-that-s ... rd-russell