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Richard Russell:  Today the US debt is $16.7 trillion.  The entire Gross Domestic Product of the US is $15.68 trillion.  This means that the debt to GDP ratio is over 105%.  History shows that a debt to GDP ratio of over 100% is dangerous.  With the debt now growing exponentially, we face a situation of inflation, hyperinflation or bankruptcy. 


On another subject, we hear that the hedge fund industry has not kept up with the markets.  Hedge fund managers tend to be knowledgeable and professional.  If professionals can’t keep up with the stock market, what are the odds that amateurs can?  The current stock market has been erratic, volatile and very difficult to make money in. 


As I see it, we are in the latter phase of perhaps the greatest debt bubble in history.  A bubble can inflate just so far, and then it pops.  When the current debt bubble bursts, it will prove to be an unmitigated disaster. 


There are now 7 distribution days on the S&P and 7 on the NASDAQ (as of Friday).  A collection of distribution days are enough to put the brakes on the market.  I believe that the current excessive number of distribution days are acting as a brake on the stock market.  The institutions are bailing while the retail public continues to pile in. 


... I had a strange dream last night -- a dream that the Averages had collapsed in a vicious bear market and that I was warning people about the depressed economy that lies ahead.  I’ve been wondering today about whether the dream was a prediction or merely a warning to be careful.


In the meantime, I believe there’s an unspoken undercurrent on the part of seasoned investors to exit this market before any major trouble hits.  And, believe me, there will be major trouble, and it will hit.  For ultimate safety in coming years, it will not be stocks or bonds or Picasso's or Bitcoin, but gold.  Gold will be the ultimate safe store of value. Gold has two great qualities.  It has a long, pristine history, and it is outside the current system.


It is notable that China is hedging against its huge hoard of US securities with gold.  When I was a young man there was a common expression, “damn clever, these Chinese” (meant in seriousness), and I believe the expression still holds.  After all, did you ever see a Chinese restaurant go bankrupt?


Below, the US dollar.  Keep your eye on this item, I know the Chinese are watching it! 




The negative talk about gold is now almost deafening.  Yet if you look at the gold chart, you can see that for some reason, gold has not broken to new lows.  I’ve said before that the Fed is fighting deflationary forces, forces that are holding back the US economy and prices.  The situation must lead to either hyperinflation or default.




The odds on hyperinflation are what is keeping gold from breaking to new lows.  Studying the P&F chart, I can see that its last signal was bullish, and a further and more important bullish signal will be given if gold hits the 1270 box.  It’s significant that gold, the metal, is far outperforming the widely watched gold mining stocks.  So what do we do with gold?  We await developments.  Despite the unending avalanche of bearish talk about gold, December gold closed up 9.7, with most gold mining stocks higher.


To subscribe to Richard Russell’s Dow Theory Letters CLICK HERE.


© 2013 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 audio interviews with Rick Rule, Gerald Celente, Dr. Marc Faber, Bill Fleckenstein, Eric Sprott, Grant Williams, Egon von Greyerz, Dr. Paul Craig Roberts, William Kaye, Andrew Maguire, David Stockman and Art Cashin are available now. Other recent KWN interviews include Jim Grant and Felix Zulauf -- to listen CLICK HERE.


Eric King

KingWorldNews.com

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