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Russell: “The market was in semi-crash mode (Friday), closing on its lows with no late rally.  I don’t think anybody knows what’s going on, but this is the story as Richard Russell sees it.  The bear market that started in October of 2007 continued through 2008, but at the 2009 lows the Fed intervened with all the ammunition at its command, and halted the bear market.


What we’re seeing now is the primary trend overpowering the Federal Reserve.  We’re now seeing the resumption of the bear market that was interrupted at the 2009 lows.  All bear markets are international in scope.  Thus the primary bear trend that we’re now in will affect everything on the planet.  Already we hear reports of a slump in China’s manufacturing.  When new Fed Chairwoman Janet Yellen takes command, she will have to open the spigots wide in an effort to halt deleveraging and deflation. 


Interestingly, fiat currencies around the world are sinking.  There’s only one currency that represents safety, and that currency is gold.  Which, by the way, is higher today.  I expect to see further semi-crash action in the days ahead, as the primary bear market resumes.  I think investors will remain hopeful as long as this decline remains this side of 10%.  But if the decline surpasses 10%, I believe we will see panic action as investors realize that this is not a correction, but a bear market. 


Over the past weeks I have instructed subscribers to stay on the sidelines and watch history unfold.  My advice is to stay out of this bear market and hold only gold bullion and a limited supply of US dollars.  I think we are watching history in the making, and it is far better to watch it than to be part of it.


Question:  Russell, what about the further melt-up that you were talking about?


Answer:  When the situation changes, I change, and I’ve changed my mind about a further melt-up.  (Friday’s) market action was awful, and attention must be paid. 


This is not a time for heroism.  If it’s tradable, it’s going to head down.  Most people today have never experienced a primary bear trend.  Most professional writers today do not understand what is happening.  What’s happening is a correction of all the inflation and hype since 1980.  It’s not going to be pretty. 

........................................


I'm taking a deep breath and telling you what I really think.  I think the Fed and the US government are embarked on a campaign to tell the American people that the US economy is a lot better than the people think it is.  This is a way of boosting Obama's legacy.


I think that the US is fighting the forces of deleveraging and deflation, and I think the Fed is losing its battle against deflation.  After spending trillions via quantitative easing, the Fed has still been unable to push inflation to its desired level of 2%.


I think the Fed's QE has flowed to the rich 1%, sending tangible items at auction and collectibles through the roof.  The Fed's QE has ironically shifted the items that the middle class uses progressively higher -- college tuition, food, insurance, energy, medical, etc.  I think the middle class is suffering hugely and a fringe of the middle class has dropped into poverty. 


I think inflation of the daily items that the middle class depends on is really running near 10%.  I think the Fed's and the US government's efforts to defame gold have been a disaster.  While the Fed and the US are bad-mouthing gold and driving it lower, their anti-gold campaign has been a boon for China.  While the US denigrates gold, China, which understands gold, is accumulating all it can.  I think that the US does not have the gold that it pretends to have. 


I think China is intent on making its yuan the world's reserve currency.  I think we will see a powerful gold-backed convertible yuan become the world's new reserve currency.  I see China's Communist leaders literally begging its populace to accumulate gold.  I see the Federal reserve intent on making its fiat currency the only accepted money, while gold, its competition, is scorned.


I see the Federal Reserve and its fiat money as the single greatest enemy of the US.  Which would you rather own, a gold-backed yuan or a debt-backed Federal Reserve note?  That's the question the world will be faced with.”


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


© 2014 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.


IMPORTANT - KWN will be releasing interviews all day today, including a special piece out of Europe.


The audio interviews with James Dines, Gerald Celente, Michael Pento, Eric Sprott, Andrew Maguire, Rob Arnott, William Kaye, David Stockman, Rick Rule, John Mauldin, Egon von Greyerz, Art Cashin and Dr. Marc Faber 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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