Peter Schiff, Why It’s Time To Dump Most US Stocks

Posted by Peter Schiff & Richard Russell comment

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Dow Theory non-confirmation

The August highs for the Averages were —
Industrials — 10698.75
Transports — 4516.35.

Today, the D-J Industrial Average closed at 10761 — 63 points above its August high.
Today, the D-J Transportation Average closed at 4511 — 5 points below its August high.

Talk about a “squeaker”! Thus, today, by a smidgen we experienced a classic Dow Theory non-confirmation. What does this mean? We should know by the end of the week. – One of the best values anywhere in the financial world at only a $300 a year,  to get his DAILY Dow Theory Letters subscription HERE

Peter Schiff, Why It’s Time To Dump Most US Stocks

Stocks are widely believed to provide inflation protection since factories, equipment and inventories rise in value as prices generally increase. Historically, stocks have in fact tended to rise with inflation rates, but too much inflation has caused volatility and raised a question as to whether stocks really are a reliable inflation hedge.

Stocks in certain sectors have similarly earned a reputation as recession protection. Stocks designated as “defensive” are those in industries that make stuff we’ve simply got to have, such as food and drugs, or items in the category of “sin,” referring to things we may not need but will kill to get – traditionally tobacco and alcohol, and perhaps other things to newer generations.

Such rules of thumb are based on common sense and will always be valid, although whether they result in gains, simply lower losses, or neither, depends on the severity of the recession, the urgency of the demand and a lot of other factors that change as a downturn proceeds.

Of course, we are not talking here about mild inflation or a minor recession except as early or late stages of the main event. The situation we are facing is of a magnitude comparable to the Great Depression of the 1930s and the next-worst bear market, the stagflation period of the 1970s. There are parallels to both cases, but also ways in which the current crisis differs significantly.

….read much more HERE