My Blog
Richard Russell continues:
“I think what's needed is a lot of patience. Sooner or later the stock market will show its hand. At this juncture, we have the pressure of world deflation weighing on ALL the markets. Against that, we have the various central banks trying to print us into prosperity and at the same time trying to defeat deflation.
How do you battle deflation? Easy, you print fiat money until deflation backs off and until signs of inflation appear. But what happens when you print to kingdom come, and inflation refuses to appear? Well, in that case your junk currency sinks to near-nothingness, and you leave the whole deflation problem to the next generation of devaluing geniuses.
I ask myself, why hold any dollars at all? What's the danger of holding everything in dollars? And my answer is -- when it comes to investing, nothing is certain. Sure, it looks as though Fed printing (now that Obama is in for another four years) will continue for the next four years or, at least, until Bernanke is convinced that he has defeated deflation.
Wait, what could cause Bernanke to halt flooding the system with his fiat notes? I think runaway inflation in tangible goods and political pressure could halt the Fed's wholesale manufacturing of Fed notes. Scandalous bubbles might appear. Bubbles in college costs, bubbles in medical, bubbles in collectibles, bubbles, in insurance costs, bubbles in food prices, bubbles in energy costs, bubbles in consumer optimism. Of course, none of this would appear in the Labor Department's phony CPI statistics. As we all know, figures don't lie, but liars can figure.
At any rate, I'm personally torn between putting all my assets into bullion gold coins or leaving half in gold and half of my assets in US dollars. Very frankly, I'm no longer even thinking of making money in the markets -- I just would love to keep my purchasing power intact. On top of that, I don't trust the government, and I don't trust the Fed or the Treasury. In their demand to making Fed notes the only legal tender money, I believe the Fed (and the government) would stoop to any trick or law or machination to ensure that Americans must accept Fed notes as the only legal tender money.
The government (Congress?) could pass a law outlawing any transactions in gold or silver or any precious metal. The government could halt the trading of gold or gold ETFs. Or there might be a dozen tricks that the government could use that would outlaw the use of gold as legal tender. Then, there are always taxes as a barrier to even owning or trading gold. As it is, the IRS treats gold as a collectible and taxes you when you sell your gold.
So I dunno, hold all your assets in gold bullion coins? Frankly, I'm afraid to. The bankers demand that I use their rotten fiat notes as money, and believe me, the bankers (the Fed) run the country.
Thus, I am doomed to hold some dollars, and, in turn, my dollars are doomed to lose purchasing power month after month, and year after year. Talk about robbery!
What about owning stocks as a way to keep your purchasing power? Bill Gross of PIMCO thinks stocks will be a lousy investment over coming years, and he thinks bonds will be even worse.
According to Cliff Asness of AQR Capital Management, the average return over the next ten years will average 0.9%. The historical average is 6.5%. Asness calculates that the probable ten-year real returns on stocks will vary between negative 4.4% and 8.3% (above paragraph courtesy of Klein-Wolman Investment Letter).
....................................................
Below, GLD, my proxy for gold. Will it rally above its blue 50-day MA? The problem, does gold have the oomph in it to rally above its 50-day MA, which stands at 168.94?
Below, DIA or my proxy for the Dow. DIA gapped up on tepid volume, and with the Israel Hamas truce in effect, the DIAs could and should move higher. MACD is about to turn up. RSI is turning up.
To subscribe to Richard Russell’s Dow Theory Letters CLICK HERE.
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
The interviews with Egon von Greyerz, Michael Pento, Wilbur Ross, Don Coxe (BMO $538 billion) and Ben Davies are available now. Also, be sure to listen to other recent KWN interviews which included Art Cashin (UBS $612 billion), Nigel Farage, Bill Fleckenstein, Rob Arnott (RALLC $100 billion) and Gerald Celente by CLICKING HERE.
Eric King
Richard Russell - Attempts To Defeat Deflation As Money Dies
With gold and silver surging, the Godfather of newsletter writers, Richard Russell, warns about attempts to defeat deflation as money dies. Here are Russell’s thoughts, along with some charts, in a note to subscribers: “Help, I'm alone. Where are my fellow newsletter writers: Stan Weinstein, Garfield Drew, Sir Harry Schultz, Marty Zweig, Chuck Almon, Bob Farrell? They all flew the coop while poor old Richard Russell is still carrying on. Maybe it's because the stock market has become impossible or irrational. I think at any given time, the stock market seems increasingly difficult to figure out.”
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast,
rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
November 23, 2012
