Who is Richard Russell?
Richard Russell is a writer on finance and he shares his opinion on the stock market and the precious metal markets through his life. Richard Russell started to publish a newsletter called the Dow Theory Letters in 1958 and this is the oldest service continuously written by one person in the business.
Today the Godfather of newsletter writers, 90-year old Richard Russell, shares what he has learned after 90 years on this earth. The 60-year market veteran also covered gold, silver, deflation, Europe, Germany, the Fed, QE, the U.S. dollar and much more.
Russell: “The world situation is as complicated as I’ve ever seen it. So let’s try to make it simple. The world is in a state of deleveraging and deflation. Europe is close to recession. Germany, the engine of the European economy, is stalling. China, now arguably the world’s largest economy, is running out of gas. Brazil is slumping, as is Japan. The only economy in the world that appears to have a strong heartbeat is the US. The great fear today is that the world may sink into a downward spiral of deflation. The Central Bank of Europe would like to join the Fed in Quantitative Easing. But Germany, which is terrified of inflation, will not stand for QE.
Thus it falls on the Federal Reserve to save the world from the terror of deflation. Will the Fed shut down QE as it claims? Or will it reverse its schedule of ending QE by the end of this month? The Fed has already bought nearly $4 trillion of bonds in its QE operations, and it hesitates to buy more.
The Fed meets tomorrow and Wednesday, after which we will discover what it intends to do. As matters stand now, the stock market is almost motionless as it awaits the Fed’s decision. Gold bullion has backed off slightly, but the gold mining stocks have been hit hard. The gold miners are cheap, hated and showing signs of stabilizing. Many speculators feel that the gold mining stocks are selling like perpetual warrants and can be bought as long-term holdings. I think the stock market’s constructive action will encourage the Fed to shut down QE as promised. But it is only after QE is actually shut down that we will know the rest of the story.
In the past, when threats of a QE shutdown were voiced, the stock market fell out of bed and bonds fainted. If that happens this time, the markets and the economy will again be put to the test. Based on world deflation, I think QE4 will be badly needed. This week, following the latest Fed meeting, should be quite a show.
The question of the day is whether the Fed will actually end QE or whether the Fed will continue its QE machinations into next year. …Therefore, the US dollar is widely held to be the only safe and healthy currency. Furthermore, it’s the US Federal Reserve that has been chosen to save the world from the horrors of deflation. But will the Fed take on this mission? Will the Fed continue to battle against deflation by creating oceans of new liquidity? That’s the question of the hour, month and the year.
If the Fed continues to buy bonds in wholesale quantities, this increase in liquidity should soon take the Dow above its 200-day moving average and propel gold over 1300. The Fed is terrified of the specter of deflation and will do whatever it takes to hold off the forces of deleveraging and deflation. Europe is ruled by Germany, and Germany, due to its experience with inflation, is dead set against the European Central Bank entering into Quantitative Easing. That’s where we find the world. It’s interesting that just 85 years ago, on October 24th, the stock market set off its first crash in the fateful year 1929. Ever since then, the month of October has possessed a nasty connotation for those who follow the stock market.
For those who like their sleep, when times are frightening the move to cash makes sense. I agree, but at this point the only cash or currency I trust are the currencies we call silver and gold. Trying to beat the market at this point is not amenable to peace of mind.
According to Tuesday’s New York Times, most of the hedge funds have had a miserable year and many have quit the industry. From my standpoint and the standpoint of my subscribers, I’ve elected to stand pat in the face of a hysterical stock market. After 90 years on this earth, I’ve learned that nothing is more important than peace of mind. No amount of money can make up for night after night of fear and trembling. Thus, I have chosen the safety of the only tangible currencies – silver and gold.
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