Russell: Take Advantage of the Fed’s “Manipulation” of Mkts

Posted by Richard Russell - Dow Theory Letters

Share on Facebook

Tweet on Twitter

Screen Shot 2014-02-25 at 5.13.04 AM

“I’ve been noting the prices being paid by the wealthy 5% of Americans and by foreigners may be a sign of things (prices) to come.  Is the $19 billion that Facebook paid for What’sApp a hint of future prices?  It occurred to me that the extraordinary prices being paid by today’s wealthy could correspond to the hyperinflationary prices that we will see 3-5 years in the future.  Thus I think today’s wealthy are establishing the hyperinflationary prices that we may see in all items during the next 3-5 years. 

If this is true, we should see the entire stock market moving higher, as it discounts future hyperinflationary prices.  If hyperinflation is to be our future, the one tangible currency, gold, should be our best protection.  If hyperinflation is in our future, then gold and the stock market should now be discounting it.  The fact that we have not had a 10% correction in the stock market since 2011 speaks of the stubborn bullishness of this stock market. 

Screen Shot 2014-02-25 at 5.13.04 AMIf I’m correct in that hyperinflation is in our future, we should shortly see new highs in the various stock market indices and a further parade of record prices for tangibles at auctions and in the news.  Also, if hyperinflation is in our future, then gold and silver are dirt cheap today. 

I dreamed last night … In my dream I was telling people that the whole stock market will shortly be lifting up from an oversold base.  I was telling people that the prices of everything will be rising until at some point hyperinflation finally takes over.  At that point the trillions of dollars that the Fed has injected into the banking system will suddenly seize the market and all tangibles in its grip.  The price level of everything will levitate to meet the astounding levels that we now see in auction prices and in the news. 

I believe all primary trends run to conclusion.  All primary trends end in exhaustion and extremes in blue chip prices.  The primary bear market that started in 2008 was never allowed to run its full course to completion.  At the 2009 low, the market was severely oversold and in need of a “rest.”  At that same time a terrified Federal Reserve stepped in with massive infusions of liquidity, thereby giving impetus to the upward correction that had started in the stock market.  I believe the Fed’s machinations will set off hyperinflation somewhere during the next two to four years.  I believe hyperinflation will be followed by a continuation of the primary bear market. 

In my 65 years of dealing with markets, I was always dealing with fair supply-and-demand markets.  The Fed’s manipulation of the markets upsets the old “rules” of supply and demand.  I believe that when this primary bear market breathes its last, the US public will be furious with the Fed.  At some time in the future, the Fed will be perceived as a menace to the nation and will be abolished by an act of Congress.

Late Notes — Today’s action was pretty much as expected. The Dow gave us the usual hundred point pop, confirmed with a 32 point rise in the Transports.  Gold continued its sterling performance, along with higher prices in silver.  Stay with your gold positions and if you haven’t done so yet, add CEF to your portfolio.



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.

The Letters, published every three weeks, cover the US stock market, foreign markets, bonds, precious metals, commodities, economics –plus Russell’s widely-followed comments and observations and stock market philosophy.

In 1989 Russell took over Julian Snyder’s well-known advisory service, “International Moneyline”, a service which Mr. Synder ran from Switzerland. Then, in 1998 Russell took over the Zweig Forecast from famed market analyst, Martin Zweig. Russell has written articles and been quoted in such publications as Bloomberg magazine, Barron’s, Time, Newsweek, Money Magazine, the Wall Street Journal, the New York Times, Reuters, and others. Subscribers to Dow Theory Letters number over 12,000, hailing from all 50 states and dozens of overseas counties.

A native New Yorker (born in 1924) Russell has lived through depressions and booms, through good times and bad, through war and peace. He was educated at Rutgers and received his BA at NYU. Russell flew as a combat bombardier on B-25 Mitchell Bombers with the 12th Air Force during World War II.

One of the favorite features of the Letter is Russell’s daily Primary Trend Index (PTI), which is a proprietary index which has been included in the Letters since 1971. The PTI has been an amazingly accurate and useful guide to the trend of the market, and it often actually differs with Russell’s opinions. But Russell always defers to his PTI. Says Russell, “The PTI is a lot smarter than I am. It’s a great ego-deflator, as far as I’m concerned, and I’ve learned never to fight it.”

Letters are published and mailed every three weeks. We offer a TRIAL (two consecutive up-to-date issues) for $1.00 (same price that was originally charged in 1958). Trials, please one time only. Mail your $1.00 check to: Dow Theory Letters, PO Box 1759, La Jolla, CA 92038 (annual cost of a subscription is $300, tax deductible if ordered through your business).

IMPORTANT: As an added plus for subscribers, the latest Primary Trend Index (PTI) figure for the day will be posted on our web site — posting will take place a few hours after the close of the market. Also included will be Russell’s comments and observations on the day’s action along with critical market data. Each subscriber will be issued a private user name and password for entrance to the members area of the website.

Investors Intelligence is the organization that monitors almost ALL market letters and then releases their widely-followed “percentage of bullish or bearish advisory services.” This is what Investors Intelligence says about Richard Russell’s Dow Theory Letters: “Richard Russell is by far the most interesting writer of all the services we get.” Feb. 19, 1999.

Below are two of the most widely read articles published by Dow Theory Letters over the past 40 years. Request for these pieces have been received from dozens of organizations. Click on the titles to read the articles.

Rich Man, Poor Man (The Power of Compounding)

The Perfect Business