With enormous volatility in global markets and crude oil rallying almost $3, today the Godfather of newsletter writers, 90-year old Richard Russell, covers everything from China moving to back the yuan with gold to a huge surprise for global stock markets. Russell also urges readers to buy physical gold and silver while they are still available.
Richard Russell: “In almost every orthodox study, the stock market is overbought and overpriced. For instance, the market’s price-to-sales ratio is at an all-time high. The market’s capitalization to GDP ratio (this is Warren Buffet’s favorite indicator) is the second highest in history. The Shiller Cyclically Adjusted PE (CAPE) Ratio for the S&P is 27. That level has been exceeded only twice before in history – in 1929 and 2000. In other words, by almost all orthodox valuations, the current market is dangerously overvalued and way overdue for a correction or a bear market. This is the orthodox way of looking at this market.
Typically, bull markets do not end with overvaluations. They end with emotional extremes. They end at valuations far above what analysts envision. By any accounting, this has been, so far, a great bull market. … The recent back and forth action of the major averages is, in my opinion, laying the groundwork for the coming third and final phase of this bull market. In the coming third phase, I expect all classical valuations to be ignored. I expect money from around the world to pour into the US markets.
Collapsing Commodities
As I write 50 minutes before the close, the Dow is down 232 and the Transports are down 113. This is far from the dreadful 10 percent correction that has been missing in this bull market. The collapse of commodities — oil, copper, and foodstuff — has served to bring about a period of hysterical fear. A 10 percent correction will take the Dow down to roughly 16,200. But so far, a decline of about 600 on the Dow has served to frighten many investors out of their minds and out of the stock market.
I believe what we are seeing now is the preamble of the third phase of this giant bull market. If I had to guess I’d say that the base of the coming third phase could last into June. Thus the bull market will test our patience as we wait for the inevitable third and final phase of the bull market.
Will the Dow complete the long lost 10 percent correction (down to 16,200) before the bull market slips into its final speculative phase? With Europe close to recession and China slumping, foreign money has been going into the US dollar and US stocks. And it’s no wonder, with the US dollar and US stocks comprising the only games in town.
China's Ascent And A Move To Back Yuan With Gold
I am particularly interested in China, whose GDP is about to take over the US’s GDP. This will make China’s economy the greatest economy the world has ever seen.
China does not want to rule the world. China simply wants to be on par with the US. To do this, China wants its currency to be as strong as or stronger than the US dollar. The world knows that there is nothing behind the US dollar of tangible value. China intends to back its currency, the Yuan with gold. If world commerce is transacted with gold-back Yuan, China will have won a tremendous victory. History show us that gold heads to the most powerful nation. That’s all the proof China needs to show that it’s on par with the United States. Happily, China is not a militaristic state. China wants a voice along with the US in matters that affect the world.
Buy Gold And Silver While It Is Still Available
Once again, I suggest that my subscribers buy gold while the metal is still available. When all fiat currencies are lost, gold will be the last man standing. Sooner or later I believe we will see a panic for physical gold. Just as gold was hated a year ago, it will be loved and wanted a year from now. Buy physical silver and gold while it’s available. Nothing is more loved than the item that was hated a few months ago. Remember, when we enter the new era, amazing discoveries and inventions will emerge. They will come from the United States, the land of the free and the home of the optimist.
Gold is trading well above its 1200 support level at 1206.80. I’m thinking that shortly it will be reintroduced into the world monetary system despite central banks' fear of gold. In the end it will be used to unite and as a basis for a fairer and a more productive world monetary system. Take the “L” out of gold and you have the word “God,” which I often thought of as more than coincidence.”
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