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Richard Russell: “As in life, nothing in the markets seems to change in a hurry.  But when an item finally changes, it tends to make up for lost time ... What do they call it when you don't trust anything?  Oh yeah, they call it “Life in the markets under Ben Bernanke.”  Will Ben continue to buy one trillion worth of bonds and assorted vehicles through the end of the year? 

... Now the whole daffy world is following Bernanke's lead.  Japan has had it with two decades of deflation, and Japan's new central bank head vows to double Japan's monetary base within two years -- or, at least buy bonds until deflation in the Land of the Rising Sun turns to inflation of at least 2%.  In the meantime, Japanese stocks are surging under Japan's new super brand of QE.

I have to wonder how long US stocks can continue to climb on the basis of quantitative easing?  I don't know, and I don't think anybody else knows either.  The strategy now seems to be -- you buy blue chip US stocks or the DIAs and stay with them until the market turns sloppy --- or until it actually turns down.  Forget values, forget sentiment, forget risk, forget the charts, forget caution -- stay with blue chip dividend-paying stocks for as long as they continue to climb, and when they halt their climb, give 'em back to Wall Street and await further developments.

But what about the “depression” that Nobel Prize winner Paul Krugman insists we're now in?  The hell with the depression, the stock market is going up, and maybe when it turns down we'll have his depression.  Until then, “What, me worry?”  No chance, I've got my gold.  And if the end of the world arrives, I'm betting gold will be my savior (that is, if Uncle Sam doesn't take it away from me at gun-point).

Most professionals and fund managers are worried about a hurricane of inflation showing up somewhere in the not-too-distant future.  After all, inflation is always a monetary phenomenon, and God knows we've had our turn at money creation.  In fact, there's never been anything like the current worldwide explosion of currency creation. 

Then what's stopping inflation?  It's the over-supply of commodities that's been pouring into the West out of Asia.  Too much copper, too much tin, too much zinc, too much in the way of merchandise, too much of almost everything.  It's a world avalanche of “too much,” and not enough demand.  But central banks come to the rescue.  They'll print us out of deflation.  And somewhere ahead, worry the money managers, the whole thing will catch fire, and we'll end up with a sudden tidal wave of inflation.  If so, then why isn't gold at new highs?  Patience, the markets always do what they're supposed to -- but never when.

The Fed is buying a trillion dollars worth of Treasuries and mortgage-backed securities so they'd drive the yield on 10-year Treasuries down to a ridiculous 1.67%.  So where does the money go?  Into blue chip stocks that are now the new safe havens.  In the meantime, the US dollar gets whacked.  Below we see the US dollar down heavily today and closing below its 50-day MA.  Note that MACD is just turning down.

But the S&P is at a new record high, and the TREND of the stock market is up, so I'm staying with the DIAs until I receive the first bearish signals ... Summing up, the Bernanke Fed has succeeded in driving everybody into the stock market or back into real estate ... It's great to make money in the stock market, and your only worry is when the Federal Reserve's punch bowl crashes ... I still like gold, and as far as I'm concerned, it's the only real safe haven.”

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© 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

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