Today the temperature hit 95 degrees here in Minneapolis. That broke a record that stood since 1912. By tomorrow afternoon, we will be hit with severe thunderstorms, strong winds and hail. That reminds me of Richard Russell’s forecast for the stock market and the economy.
I have a particular fondness for “old” Russell. He, has been my number one mentor and has opened my eyes to the workings of the stock market and gold. I started in this business in 1983. He had already been at it for 35 years and his easy-going writing style caught my fancy, as well as his mostly-right-on market analysis, for the past 27 years. In the 27 years that I have read Russell, I honestly can never recall him being so fearful. He is literally begging and pleading with his 10,000 subscribers to get out of the market NOW. My advice to all of my readers is to heed his warnings! He is not out-of-touch with reality, as the younger Wall Street analysts and money managers often suggest. Far from it. It is the current breed on Wall Street with the big titles, salaries and egos that are out-of-touch. I won’t have to defend my stance for long, because before 2011 rolls around, you will see for yourself. Either you will listen and sell your stocks now and move into cash and gold, or you will wish that you did.
I have a lot of important information for you today, but none more important than Russell’s comments from May 24. In fact they are so important that I am inserting them here, along with my opening remarks instead of later in the Daily.
William Hamilton, the great Dow Theorist and early editor of the Wall Street Journal, wrote, “When coming events cast their shadows before, those shadows fall on the New York Stock Exchange.”
Well, believe me, the shadows have been falling on the New York Stock Exchange, and the shadows are saying (I’ve warned about this dozens of times) that there’s “a hard rain’s a’comin.” And Richard Russell’s main concern is to open up the umbrella and attempt to keep his subscribers out of that hard rain.
You may remember that I compared the bear with a cat playing with a dying mouse. The mouse will crawl away and just when it looks as though the mouse has escaped, the cat will pounce on the mouse again. That’s the way I see today’s bear acting. He’s playing with the minds of the bulls. Study the chart below. This is the percentage of NYSE stocks trading above their 200-day moving averages. The percentage plunged and has recovered minimally to 51.2%, meaning that only half the stocks on the NYSE are holding above their 200-day MAs. RSI, which is a momentum index, and MACD are both in the oversold zone.
This suggests that we could have a few days of rally, which might bring the index shown on the chart back to maybe 70%. But as far as I’m concerned, the fate of this market is written in stone. The top is in. My work says that we’ve seen the top, and we’ve seen the highs for the entire bear market correction.
And I’ll repeat what I said at the beginning of this site — if we’ve seen the top and the highs, this market has nowhere to go but down. And down it will go. The only question in my mind is the form or pattern this bear market will take as it makes its way down to its inevitable bottom. At the bottom, assuming that the US is still in “functioning” condition, we’ll see blue-chip stocks selling at incredibly low prices. The problem — will we have the cash and the guts and the understanding to buy the bargain blue-chips?
Remember, now is your final and best place to raise cash. And if cash (Fed notes) are worthless by the time this bear market reaches its low, then we have gold. You can’t devalue gold. You can’t eliminate its value. Since pre-Biblical times, gold has been the one standard of value. “Why is that?” you ask. And the answer is that gold is imbedded in the DNA of man. Nothing else has ever been discovered or developed to take gold’s place. Nor has any argument or rationale diminished man’s eternal lust and desire for gold.
Gold — The phony warnings are out. “Gold is still a chancy investment, it pays no dividends and it’s in a bubble.” I talked to one of the managers of a multi-billion dollar fund last week. His funds owns no gold. And he couldn’t understand the “meaning” of gold. I tried to explain to him the concept of gold. It was like trying to explain to him youth’s love of rebellion. To understand gold, you have to be part philosopher.
At any rate, mankind seems to intuitively love gold. Mankind intuitively treats gold as wealth. The acceptance of gold has existed in every religion and in every nation of the world since the dawn of man. Why argue? If you can’t understand the importance of gold, it’s your problem. Do the work, read about it. It’s like not understanding gravity, it’s there whether you understand it or not.
As I write a few hours after the opening, June gold is up 16.70 to 1192.90. June gold is back above 1190 again, and minus a lot of amateur traders.
Fundamentals — Gold is in a huge long-term bull market. My experience with in-and-out trading, in a primary bull market is that you tend to be “out” just when you should be “in.” The best method of dealing with a bull market is to “ride the bull” the way rodeo bull-riders cling to their bulls — and stay on the bull as long as you can.
What’s left to say after that! It would be comforting if Russell was a lone voice in the wilderness. We could dismiss his views as out of touch with reality. But Jim Sinclair, another “old timer,” says it’s all over, the fat lady has sung. There are no fixes – the dollar will be history and gold will soon reach $1,650 and up from there to $3,000 or $5,000 an ounce- or even more. John Williams predicts a Great Depression followed by hyperinflation and writes that gold is the best asset to own. And there are many more with similar views.
Gary North wrote – The Most Important Speech I Have Heard in This Century: The Inevitability of Worldwide Default
The English-speaking world’s most influential historian, Niall Fergusson, blew the warning trumpet on the watchtower on May 13. He showed why the West’s governments will all default, if history is a guide.
He pulled no punches. He offered no “unless we’s.” As Mr. T would say, “They’re going down!”
He gave this speech at the Peterson Institute for International Economics. For years, Peterson officially ran the Council on Foreign Relations. He is a billionaire. He is extremely influential.
The room was filled with high-level people. No one challenged Ferguson’s presentation or conclusions. No one aisled: “What can be done to stop this?” One man asked: “Where should we invest?” Ferguson offered an answer. He also said, that in Great Britain, no one ever asks this. Here, it’s the first question Americans ask. He said this was why he moved to America.
The speech begins about 8:30 minutes in. Watch the Q&A session that follows it. It begins automatically at the end of the speech. There, he really gets hard-nosed.
He said that we need a new currency based on a commodity: oil or gold.
Or download the full transcript. Fiscal Crises and Imperial Collapses: Historical Perspective on Current Predicaments – Niall Ferguson (Harvard University)
I have invested literally more than 20,000 hours over past 27 years studying the economy and gold. I am recognized as being well schooled in gold and silver fundamentals. I have been a featured speaker at major economic conferences from Hong Kong to Zurich to the Cayman Islands and throughout the US. I find “effective” to quote others, but let me assure you, I have come to the same conclusions independently, and have frankly never been more concerned. The wolf- who never seems to show up at our door- is knocking loudly NOW. You will soon have to deal with the impending loss of your wealth in the stock market and a rapid rise in the price of gold and silver. Also, I assure you, being very well positioned in the industry, that your ability to trade your dollars for physical gold and silver will be put to the test. Already, there is a huge shortage of Canadian Maple Leafs. There are no Krugerrands available. Record amounts of American Eagles, both gold and silver, are leaving the shelves. We are experiencing record-setting business and much of it consists of very large orders. If just a few percent of America’s wealth shifts from stocks and bonds into gold and silver, you will have to wait in line and accept long delays (as the prices rise rapidly) to fill your requests. This is not “sensationalism.” I am telling you what is happening. Our biggest wholesaler, one of the five major US-based distributors of the mints, has warned us of what is coming. They cannot get a single Maple Leaf, or Krugerrand right now. It will get worse. Buyers in Europe, and Germany in particular, are scooping up all of the gold they can find. They emptied the vaults from the Canadian Royal Mint recently. They will turn their attention to the US Mint next and then the Gold Eagles will be sold out too. In this game of musical chairs, do not be the one left standing without a chair when the public decides to participate in the one-going gold bull market.
Many of our readers are not clients and they will probably not act on this advice. But for you, our valued clients, I am urging you to act now – take Russell’s sage advice and get out of the stock market and go strictly into cash and gold (and silver). I share his sense of urgency! Call us at 1 (800) 822-8080 and find out what is still available.