I have never met Richard Russell, but I have been reading him since 1977, when I first began doing this. He’s possibly the most accurate prognosticator of markets I have ever had the pleasure of reading. He isn’t cheap. $250 for 17 letters, but then you can latch on to his daily commentary on the Internet if you are a subscriber, which makes it actually cheap as far as I am concerned. (Box 1759, La Jolla, CA 92038 or www.dowtheoryletters.com) I just have to quote a few lines from his latest letter. In regards to the stock market: “For one reason or another, the public is fast losing interest in the stock market.” He pointed out that the prices are about the same as they were five years ago, and in the case of the S&P, lower. “I’ve seen this phenomenon many times before. It happens with each stock market cycle. The difference, this time, is the current national obsession with speculation and gambling. As someone put it, “The business of America is Americans selling houses to each other with money that is borrowed from China.” Or as a Russian visitor observed, “The United States appears so prosperous. This is amazing. How do you have prosperity when you no longer make anything?”
“The secret to the US’s fake prosperity is the willingness of the world to accept dollars. Think of it: The globe’s biggest debtor, a nation that is building an ever-greater edifice of debt. Holders of gold grow impatient. They become grumpy, and they chafe at the bit; but most fail to see the pattern. The pattern is a relentless climb up the stairs.”
The charts show what I have been saying for years. It is like a ratchet. Gold goes up $5, and then slides back $2. Up $10, and back $4, or whatever happens to be the current up-down pattern. Forget the manipulation for a bit, because the so-called manipulators have been grossly UNSUCCESSFUL, if they exist at all. Sometimes I do indeed wonder.
We all know that the buck is being printed pell-mell towards total worthlessness, but how about the rest of the paper money around the world? Try these on for size. The following nations’ currencies are being printed at the following increases year after year. Australia up 10.8%, Britain up 11.3%, Canada up 10.4%, Denmark up 15.7%, Sweden up 9.4%, and the Euro up 7.5%. The buck is supposedly up 5%, but I think that is unabashed B.S.
The so-called manipulators tried hard to keep gold under $275, and failed. They tried to keep it under $300, and failed. They tried to keep it under $325, and failed. The pattern continues, until today, gold is over $465. If the gold is being manipulated, those doing it are certainly not having a good time of it, because it has gone from $258 to $465. If gold is being “manipulated,” I can’t see it.
More Russell: “As I’ve said before, Alan Greenspan can boast that we only have 2 percent inflation, but ask the “punch bowl kid” about the purchasing power of the dollar since he took office back in 1983. The Fed IS inflation. Since Greenspan took office, the purchasing power of the dollar has been cut in half. Under the Federal Reserve system, inflation is as necessary and as certain as the truism that night follows day. You buy a certain number of gold coins and you hide ’em, and in twenty years those gold coins will represent wealth. I’m not sure anything else we own will represent wealth.”
In 1985, Lawrence Pratt of the American Institute for Economic Research wrote: “(1) All the currencies of the world began as coins, and paper currency and checks gained acceptance because they were claims on coins. (2) There are virtually no gold or silver coins today that are worth less than when they were first issued; and (3) Throughout history, irredeemable currencies have in time become worthless, and ALL paper currencies (except for collectors’ items or rarities) are today worth less than when they were issued.”
The bankruptcy Abuse Prevention and Consumer Protection Act of 2005 has hidden provisions which require every American with a credit card to pay 4% of the balance plus interest, rather than the previous 2%. This means that minimum payments will increase each month.
Currently, 92% of Americans carry 5 to 6 credit cards in their wallets, and 55% have 7 to 8 cards in their wallets. 20% of credit card users are “maxed out,” and cannot charge more. When the law takes effect on October 17th, undoubtedly thousands will be forced into bankruptcy. Further, the new law requires card-holders to pay off their balances during their lifetime. No more ’pay the value of the car rather than the balance.’ The entire balance will be paid in one’s lifetime. No more “homestead exemptions” of over $125,000 either, whatever that is.
Currently, the average credit card debt per person, is estimated at $8652. A minimum 2% payment used to be $173.04. The new minimum payment will be $346.08 plus that exorbitant interest of course. If one has $20,000 in credit card debt, payments on principle will go from $400 to $800. Frightening? Not to those of us who live sensibly and pay the bill in full each month, don’t buy new cars, or switch homes every two or three years, which seems to be the average. For those who have skirted bankruptcy for years, it may no longer be possible to go bankrupt. They’ll have to simply pay what they owe, and not be able to foist off their bad debts on the credit card issuer. In other words, the interest rates may go down. They are high because of all the deadbeats out there. Dead-beating may be a thing of the past, and thank goodness for that. Us non-dead-beats don’t pay any interest anyway.
More Russell, from his daily comments on 9/20: “But what of gold? Why is real money surging at this time? Gold is rocketing higher because gold is pure wealth outside the system. Gold represents real wealth with no debt against it. Gold represents wealth outside the system. Gold needs no central bank, no government, no man or group of men–to tell us it’s wealth. Gold stands alone in this regard.”
A client just visited me, and observed this pertinent point. He says, and I agree, that in the last 50 years, nothing has improved other than life span. Government is bigger, more oppressive, and expensive. The dollar is collapsing all too fast. Crime has not gone down, regardless of fake pronouncements from the FBI. No one is safe at night in a big city. The air is filthier, America owes everyone, the welfare rolls are burgeoning, and its recipients know not how to do anything but produce more welfare recipients, it seems. Nothing is better that it was 50 years ago. Everything is more expensive, and our lifestyle has reverted to 50 years ago, at least as far as wealth. The prices have gone up far faster than the salaries, and credit card debt and bankruptcies are huge. What’s better than 50 years ago. Computers? We did fine without them. Manufacturing has gone overseas, we are deluged with illegals by the hundreds of thousands each year, and no one in D.C. wants to stop them. Cops aren’t allowed to shoot anyone regardless, and if they even remove their gun from its holster, they must file a report. Drugs are everywhere, and compared to 50 years ago, the major cities are trashed. We have thousands of federal laws, regulations and bureaucracies, which didn’t exist 50 years ago, and tens of thousands of bureaucrats to enforce them. America has had 9/11, JFK assassinated, Vietnam, Iraq, New Orleans obliteration, gun controls by the dozen, Patriot Acts, and uncountable abuses of our Constitution. Mike went on and on, and I agree with him. Protect yourself.