As the world continues to digest breaking news out of Greece and Ukraine, the Godfather of newsletter writers, 90-year old Richard Russell, warned that all major countries are now at war with one another. Russell also discussed what this will mean for gold and the currency markets.
Richard Russell: “Last week closed on a bullish note, with the Dow finally climbing above important resistance at 18,000. The law of big numbers applies now. The longer the Dow remains steadfastly above 18,000, the better the odds that the Dow will move higher with the intention of making contact with 19,000.
All Major Countries At War With One Another To Devalue Their Currencies
Japan is deflating, China is suffering a minor slump and the EU is fighting deflation. The battle for the cheapest currency continues, and the result is higher equity prices in terms of the cheaper currencies.
Gold
As for gold, the background is so mixed and complex that I have decided to simply follow the price action. As long as gold holds above 1200 I will consider the price action bullish. My preferred action in gold is to hold the physical metal. The bearishness towards gold can be seen in the action of CEF, which is now trading at a discount from the actual prices of silver and gold.
U.S. Dollar Topping?
Currently investors are looking for two things, safety and income. On this basis, the US dollar has been the popular and widely chosen item. When an item becomes overloved, I start watching for the construction of the top. On this thesis, it would not surprise me if the dollar has built a top. If the dollar is indeed topping, smart investors will switch to the safest of all currencies—gold.
Today the US dollar is down 0.13 to 94.07 on the dollar index. Oh for the good ol’ days before Federal Reserve manipulations and honest government statistics. Tomorrow is another day.
Hyperinflation Already Apparent
With Europe about to take part in quantitative easing, more fiat money will be created. Some observers are predicting hyperinflation. Already we see signs of hyperinflation in the price of New York real estate. We also see it in the prices of jewelry and art.
What Does It All Mean?
The darling of the investment world has been the US dollar. The dollar is as loved as the gold miners are hated. The frenzy with which the dollar is being bought is frightening. The fury with which gold is being sold bespeaks of the formation of a bottom. Sell the most loved item and buy the most hated item. I believe that selling the dollar and buying the gold stocks makes sense at this time.”
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