As people continue to digest breaking news out of Greece and Ukraine, today the Godfather of newsletter writers, 90-year-old Richard Russell, warned central bankers are now moving to protect themselves ahead of a historic global crash.
Richard Russell: "Everybody and his brother are talking about when the Fed may raise rates, but few are talking about why the Fed may raise rates. But Richard Russell knows. The Fed will raise rates to protect its fanny. Remember when Alan Greenspan let the housing market go crazy and then crash? Greenspan’s answer was that nobody can tell when things get too hot, but after they crash, we should simply clean up the mess.
Melt-Up Followed By A Crash
With money from all over the world rolling into the dollar, and the dollar buying US stocks, the Yellen Fed is afraid of a buildup in the stock market and then a crash. So by raising rates, the Fed can say that it saw the market becoming overheated, and if the market then crashes, the Fed can insist that it raised rates early to calm down the stock market. Of course the Fed will never admit this since they can’t even mention a melt-up and then a crash. But raising rates is the Fed’s way of covering its fanny. You heard it here first.
As I write, the stock market is boiling. If the Dow closes today above 18,000, I think the melt-up is beginning. Recent studies show that almost no mutual funds have kept up with the market since the 2009 lows. Be glad that you’re not managing money, since every money manager, to save his skin, must be "in" a rising stock market.
Dollar Strong As Stocks Overvalued
The stock market is overvalued, overloved and manipulated, with money from around the world pouring into the US dollar, and from there, into US stocks. But ominous indications are starting to appear. There are six distribution days on the S&P and five on the Nasdaq. This is a very large number, and it tells us that professionals and some institutions are bidding this frenzied market good-bye.
If you have Barron’s, study the market page on the Dow Jones Averages. Recently the Industrials hit a record high, unconfirmed by the Transports. After that, the Industrials plunged below preceding lows. The Transports did not confirm on the downside. This set off a new surge by the Industrials. Today the Transports confirmed in direction and they’re up 150 points. I’m writing this an hour before the close and am most interested to see whether the Industrials can close above 18,000. If they do close above 18,000, I think the melt-up, which so worries the Fed, will be underway.
Coming Weeks And Months Should Be Historic As Fed's Worries Increase
For my subscribers, I’ll repeat again, that the risks trump the rewards of being in this stock market. Sit on the sidelines and watch the show. I believe the next weeks and months could be historic. As the stock market boils, the Fed’s worries increase. As I write, the Industrials and Transports are both up triple digits. As they said when I was a boy, “hold your hat.”
Gold – The Key To Peace Of Mind
As for gold, it’s at 1153 as I write. I now call gold the “peace of mind metal.” Gold has been hit by the collapse in the price of oil. Many an analyst sees the oil crash as a sign of deflation. My thought is that the collapse in the price of oil is temporary and will support the central bank of Europe in their move toward quantitative easing.
It’s possible that most of the gold bears have dumped their positions and that gold above 1100 is on solid grounds. Holding gold over the years and decades has been a legitimate way to retain your purchasing power. The only risk to holding gold is the occasional corrections and bear markets, which have always been surpassed in due time." I would encourage all readers around the world to access Richard Russell's 90 years of wisdom and remarkable writings at Dow Theory Letters by CLICKING HERE TO SUBSCRIBE.
***ALSO JUST RELEASED: 50-Year Veteran On Gold And How Bad Things Have Suddenly Become In The West CLICK HERE.
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