On the heels of continued volatility in the gold and silver markets, the Godfather of newsletter writers, Richard Russell, writes that we are living through some of the greatest and momentous changes in world history. Russell also discusses the US dollar, inflation, the Fed, and what is happening in the gold market.
Richard Russell: “As in life, nothing in the markets seems to change in a hurry. But when an item finally changes, it tends to make up for lost time … What do they call it when you don’t trust anything? Oh yeah, they call it “Life in the markets under Ben Bernanke.” Will Ben continue to buy one trillion worth of bonds and assorted vehicles through the end of the year?
… Now the whole daffy world is following Bernanke’s lead. Japan has had it with two decades of deflation, and Japan‘s new central bank head vows to double Japan‘s monetary base within two years — or, at least buy bonds until deflation in the Land of the Rising Sun turns to inflation of at least 2%. In the meantime, Japanese stocks are surging under Japan‘s new super brand of QE.
I have to wonder how long US stocks can continue to climb on the basis of quantitative easing? I don’t know, and I don’t think anybody else knows either. The strategy now seems to be — you buy blue chip US stocks or the DIAs and stay with them until the market turns sloppy — or until it actually turns down. Forget values, forget sentiment, forget risk, forget the charts, forget caution — stay with blue chip dividend-paying stocks for as long as they continue to climb, and when they halt their climb, give ‘em back to Wall Street and await further developments.
But what about the “depression” that Nobel Prize winner Paul Krugman insists we’re now in? The hell with the depression, the stock market is going up, and maybe when it turns down we’ll have his depression. Until then, “What, me worry?” No chance, I’ve got my gold. And if the end of the world arrives, I’m betting gold will be my savior (that is, if Uncle Sam doesn’t take it away from me at gun-point).
Most professionals and fund managers are worried about a hurricane of inflation showing up somewhere in the not-too-distant future. After all, inflation is always a monetary phenomenon, and God knows we’ve had our turn at money creation. In fact, there’s never been anything like the current worldwide explosion of currency creation.