Brief Excerpt from Richard Russell’s Dow Theory Letters. One of the best values anywhere in the financial world at only a $300 subscription to get his DAILY report for a year. HERE to subscribe. Amongst his achievements Richard was in cash before the 2008/2009 Crash and he has been Bullish Gold since below $300 Ed Note: Richard Russell is bullish Silver and holds one of the largest single positions he has held since the 1950’s in the precious metals.
My investment strategy is now being voiced or followed by too many major hedge funds. The thinking is that as vanishing stimuli and de-leveraging takes over, the economies of the world pressured by central bank conservatism will force the US and western nations into a double-dip deflationary recession. The response will be to keep rates at zero and open the money spigots wide, wide, wide. This is where ownership of gold “was supposed to” come in.
Then, I ask myself, is this scenario too pat? Is it too popular? There’s always a fooler. Where’s the fooler this time? I think the fooler will be the stock market. The stock market will be considerably worse than the smart boys are figuring on. Deflationary pressures will be severe and the need to re-inflate will be more pressing than ever.
Gold will be needed – not as a safe haven against inflation, but as a safe haven against crushing deflation. Deflation will flatten everything in sight including base metals, commodities, housing, job creation. The single island of preserving wealth will be gold. Unlike junk fiat currencies, gold cannot be devalued.
As I look ahead, the area that the experts do not understand is the stock market. Almost all the current opinions revolve around stocks remaining in a high-level trading range. This will prove to be an horrendous miscalculation.
Why do I think the stock market will be so rotten? Here’s why. Look at the chart of the Dow in the current issue of Barron’s. Or study the chart of the Dow below. If this isn’t the mother of all head-and-shoulder top-formations, I’ve never seen one. If this formation falls apart, I expect the break to signal a the start of a brutal decline in stocks. The first area of support is Dow 10,000. The base of the entire formation comes in at Dow 9800. If the formation breaks down, I think all previous plans, scenarios and strategies will hit a stone wall. Wall Street and public sentiment will turn black-bearish. Consumers will head for the storm cellars and once in, they’ll shut the door above them and lock it.
Ed Note: Richard Russell is bullish Silver and holds one of the largest single positions he has held since the 1950’s in the precious metals.