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Richard Russell - Gold, Silver, Stocks & Collapsing Incomes
With key global markets at or near breakout levels, and continued, enormous volatility in the gold market, today the Godfather of newsletter writers, Richard Russell, covers collapsing incomes, gold, silver, stocks, the Fed and more. Here is what Russell had to say in a note to subscribers: “From an investment standpoint, there's one major problem with this stock market. What's the problem? The problem is simply that it's not a good value. Great investment markets are characterized by being great values. The criterion of value is the return on the investment (the single exception to this rule is gold).”
© 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 This material may not be published, broadcast,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.
February 28, 2013
Richard Russell continues:
“The dividend yield on both the Dow and the S&P Composite is currently below 3%. Classically, it is well to remember that when the dividend yield on these two averages is in the 5-6% range, they are great values. Because the return on the investment is now so low, investors have been forced to go to other asset classes.
This has included junk bonds, option buying and selling, preferred stocks, diamonds, collectibles, commodities, agricultural lands, art, and a variety of unusual items ... My own opinion of buying or trading in such exotic products can be summed up in one sentence -- “Don't do it!” The reason I say this is because you and I are amateurs pitting our wits against professionals. In such exchanges, the professional almost always wins. It's as simple as that.
OK Russell, then what are we to do in the face of today's over-valued stock and bond markets? I wrote all about this in my piece that you can read on the main page of my site. The article is titled, “Rich man, poor man.” In essence this article advises that we employ one essential -- patience. There is seldom a time when at least one asset class is not on the bargain table. Really, then Russell, what do you see that you consider on the bargain table now?
My answer is the precious metals, namely silver and gold are both on the bargain table. My thinking is that ten years from now we'll be knocking our knuckles against our heads and complaining, “Back in 2013 what was I thinking? Gold was selling at 1,600 dollars an ounce and silver was selling at 30 dollars an ounce. What was I thinking? I should have --- “
At any rate, that's the way I see the world of investments today. Wait, there is one caveat. The best investment today is owning a business that throws off income. The second best investment today is a profession that throws off income (doctor, dentist, lawyer, computer expert, etc.) The final best investment is a job in an industry that is safe and stable.
Many years go I predicted that in coming years, the most wanted item would be INCOME. Today, sadly enough, thousands of Americans have no jobs and no income. Other thousands have no jobs and no savings. At the same time, millions of Americans have savings, but because of minuscule interest rates, they have no source of income.
In the investment business there's always a trade-off. Ben Bernanke believes he can revive a burst-bubble economy by giving away money and pressuring interest rates to near-zero. In doing so, Bernanke has levitated the stock and bond markets while leaving millions of Americans with savings but no income.
To do this, Bernanke has left the Fed with a balance sheet nearing $3 trillion. Bernanke claims that he'll be able to sell a large portion of the $3 trillion back into the market with no ill effect. But it won't be Bernanke who will do the selling -- it will be some future Fed chairman. And the madness goes on.
God bless America and my faithful subscribers.
LATE NOTES - This market had every opportunity to go down. But the market wanted no part of the downside ... and it looks as though tomorrow could see a new Dow record high. I can almost feel the frenzy as the “little guy” rushes in and climbs aboard, thinking that this is his golden chance to win back some of his 2008-09 losses!
Gold near the close is down 20 points, but still above 1600. If you have bullion coins, don't even think about selling them!”
To subscribe to Richard Russell’s Dow Theory Letters CLICK HERE.
King World News note: It’s true that many, many years ago, before the massive unemployment we are seeing today in many parts of Europe and the US, Russell predicted that people would be starved for income. The horrific thing is that this situation has extended to seniors who were responsible and saved for retirement, but can’t get any interest income because of the destructive central bank policy termed “financial repression.”
© 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.
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Eric King
