Richard Russell: “My thoughts go back to 1957. I wrote my first article for Barron’s in December of 1957, in which I noted that we’d never had a third speculative phase in that bull market. Soon a vicious recession was on, and everybody was bearish. I predicted that despite the recession, we would see a speculative third phase in the secular bull market. The third phase did come, and my forecast proved correct.
I’m wondering whether the same situation exists today, with the speculative third phase somewhere in our future. Despite the sluggish GDP, I believe you will see a third phase speculative blow-off in this bull market. Often in a bull market’s third phase, profits are larger than anything seen during the first and second phases of the bull market. For this reason, my current thinking is that subscribers should hold gold and DIAs. The last thing investors are expecting now is a profitable third phase explosion in stocks, and perhaps something close to hyperinflation in the money market.
I believe you see a phenomenon where increasingly bullish retail buyers are coming into this market, while at the same time institutional money is taking profits and moving to the sidelines. I expect this action to accelerate in the coming months, leading to an upside boom in stocks, along with a good deal of churning action. It is now recognized that the forces of deflation are pressing down on the US economy, and that more QE will be needed. This will halt deflation and gradually lead to inflation, finally being expressed as a boom in the stock market.
Thus the great bull market will end as all bull markets do: with a massive entrance of the retail public and subtle distribution by institutional money. Our subscribers’ choice: going into what appears to be a growing stock market bubble, or remaining in the universe of gold, which is acting as though it is at a bear market bottom.
As for gold, China is accumulating all it can at these attractive prices. It seems to me that China is intent on creating the world’s largest hoard of gold. The Golden Rule: “He who owns the gold makes the rules,” and owns the reserve currency … I think the present system has, in effect, been destroyed by more debt than we can handle. I think a new system will be required, a system based on gold, which will automatically put a brake on debt.”
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About Richard Russell
Russell began publishing Dow Theory Letters in 1958, and he has been writing the Letters ever since (never once having skipped a Letter). Dow Theory Letters is the oldest service continuously written by one person in the business.
Russell gained wide recognition via a series of over 30 Dow Theory and technical articles that he wrote for Barron’s during the late-’50s through the ’90s. Through Barron’s and via word of mouth, he gained a wide following. Russell was the first (in 1960) to recommend gold stocks. He called the top of the 1949-’66 bull market. And almost to the day he called the bottom of the great 1972-’74 bear market, and the beginning of the great bull market which started in December 1974.
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