As people continue to digest breaking news out of Greece and around the world, the Godfather of newsletter writers, 90-year-old Richard Russell, warns that the world's disastrous situation will produce the greatest bear market in history. Russell also shares his strategy for surviving the coming chaos.
Richard Russell: "Today everybody watches the news with the intensity of a barn owl searching for mice. Over the last few days I think I've seen over 100 technical studies all saying that signs of a market top are missing. The definitive characteristics of market tops have not yet appeared.
To which I reply, what about long-lost Dow Theory? The Industrials have recorded new record highs and yet the Transports refuse to confirm. The Transports are below their 200-day moving average, yet the Industrials fluctuate within a few hundred points of their all-time high.
The Transportation Average is a mixture of airlines, truckers and rails. Industry may be producing the goods, but if the goods are not moved, the economy is in trouble.
My Advice To Subscribers As The U.S. Dollar Runs Into Trouble
My advice to subscribers, as it has been for many months, is to hold physical silver and gold and avoid just about everything else. The US dollar has been the prized item for many months. Our foreign friends have wanted dollars so they can buy US stocks and Treasury bonds. But suddenly doubts have arisen about the health of the US economy. The dollar has been overbought and may be topping out.
In this chart (below) we see the dollar in a dangerous parabolic rise. For the first time this year the dollar index has broken below its 50-day moving average.
Keep your eyes on the dollar and the Transports. They may be setting the stage for surprises that lie ahead.
The World's Predicament Will Produce The Greatest Bear Market In History
The world is suffering from our current predicament. There's too much debt and the debt is causing deleveraging and deflation. Normally this would lead to a primary bear market. The central banks believe that by keeping short rates near zero and creating more liquidity through QE, the economies of the world can be rejuvenated. Thus, the answer to the ocean of debt is to pay it off by rejuvenating the economies through QE. This is comparable to lifting yourself up by pulling on your boot straps.
As I see it the forces of deflation and deleveraging will ultimately overcome everything else. The power of compounding debt will produce the greatest bear market ever seen. What will end the bear market? Exhaustion and refusal of investors to continue selling. Near the bottom of the bear market we will see the destruction of all fiat currencies and new currencies will have to be created. Each of these new currencies will entail gold in its composition.
The Disastrous Endgame
What I have written above may sound fanciful, but I've wracked my brain trying to think of a painless way that the US debt can be managed. Debt can be paid off, it can be refinanced, or it can be reneged on. The fourth way is that debt can be diminished by hyperinflation.
Example: You owe a thousand dollars and your income is $8,000 dollars per year. The thousand dollars has the effect of putting you in potential bankruptcy. A few years go by and you are now making $50,000 dollars per year. The thousand dollar debt you owe becomes chump change. Hyperinflation diminishes the power of debt. But the trouble with hyperinflation is that the public would not stand for it." You can subscribe to Richard Russell's 90 years of wisdom and remarkable writings at Dow Theory Letters by CLICKING HERE TO SUBSCRIBE.
***ALSO JUST RELEASED: A Remarkable View Of The War In The Gold And U.S. Dollar Markets CLICK HERE.
© 2015 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 Chris Powell, Andrew Maguire, Rick Rule, Bill Fleckenstein, John Mauldin, Michael Pento, Gerald Celente, Egon von Greyerz, Dr. Paul Craig Roberts, James Turk, Dr. Philippa Malmgren, Eric Sprott, Robert Arnott, David Stockman, Marc Faber, Felix Zulauf, John Embry and Rick Santelli are available now and you can listen to them by CLICKING HERE.