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Quote of the Day

Tuesday, April 10, 2012

April 10, 2012 -- "Irredeemable paper money has almost always proved a curse to the country employing it." Irving Fisher.



Yesterday I wrote a good deal about Richard Duncan and his new book.


What does Duncan foresee for the future? He poses three scenarios:


(1) The government provides no stimulus, neither fiscal nor monetary (for fear of inflation). This he believes will give way to a horrendous depression.


(2) The government does not supply any additional fiscal stimulus, but it does supply additional massive QEs (money printing).


(3) The government does supply a large round of fiscal stimulus.


I don't disagree with Duncan's choices. Duncan believes that number 3 will be the way it will go.


As for number 1, I don't have the answer as an investor. Maybe we just incur a large gold position and stand still through all corrections while holding on to our gold. Have a home, preferably in the country where you can grow your own small crops of food, and you're away from the crowds.


Number 2 -- Save some cash, load up with gold and silver, and be patient. Get ready for a crime wave -- a large segment of the population will do "whatever it has to" in order to obtain food. Hungry men and women can be desperate and lawless.


Number 3-- This will be a long, drawn-out situation, probably not becoming toxic until the years 2015 to 2017. This period will ultimately see pressure on the dollar with an accompanying collapse of stocks and bonds. Start by buying top-grade dividend-paying stocks (i.e., JNJ, KO, ABT, PEP, permanent Portfolio (PRPFX) -- and gold on dips or corrections. Then sell stocks on a potential spike, and hold your gold. This era will see the catastrophic collapse of all fiat money. Gold should skyrocket. Get ready for crime and violence.


Number 3 will see the end of fiat money and probably a new monetary system and a new governmental system. Europe and Asia will both go through chaos. Immigration to the US will be huge. The eurozone will come apart. The barter system will be king. Real estate, gold, silver and diamonds will be the main vehicles of wealth (along with weapons). Start now watching the stocks of Sturm Ruger (below) and Smith & Wesson.


Duncan believes that the government should start a huge spending program during choice 3, with the aim of rejuvenating America. He is in favor of a program to use solar to generate a giant energy producing industry. Duncan wants multi-trillion dollar programs, perhaps started by the government, which will be profitable. In the absence of sensible government leadership. Duncan sees depression and deleveraging.


I have posted a daily chart of weapons-maker Sturm Ruger below. I think this bullish chart is telling us something (and what it's saying is rather disquieting).





The chart below is a P&F chart of my PTI. The recent downward zig-sag on the chart tells me that my PTI is at the beginning of a correction mode. If the down-trend in this P&F chart hits the box where the arrow is pointing, we'll have a full-fledged sell signal at which time we should be out of all stocks (except gold mining shares). I assume that my subscribers are OUT of stocks now. Something very wrong is going on in Europe at this time. As I write both the Dow and the Transports are down triple-digits. This is occurring as almost all the news had turned bullish. The retail public is optimistic and is buying stocks and consumer goods. The big money is worried and is selling stocks. Russell is turning bearish as per his PTI below. Watch Dow 10,000. If the Dow breaks 10 grand, I see shadows of Duncan's "New Depression."








My PTI was down 6 at 6375. The moving average at 6367, so my PTI is bullish by 8.


The Dow was down 213.66 to 12715.93.


Transports were down 108.86 to 5088.13.


Utilities were down 5.96 to 449.84.


NASDAQ was down 55.86 to 2991.22.


S&P 500 was down 23.61 to 1358.59.


There were 463 advances and 2609 declines on the NYSE.


There were 29 new highs and 70 new lows.


Total Volume on the NYSE and associated exchanges was 4.65 billion.


Bonds: Yield on the 10 year T-note was 1.982. Yield on the long T-bond was 3.124. Yield of the 91 day T-bill was 0.091%.


Dollar Index was up 0.10 at 79.83. Euro was down 0.45 at 130.82. Yen was up 1.32 at 123.89. Currency Prices as of 1 PM Pacific Time.

June gold was up 16.80 to 1660.70. May silver was up 0.15 to 31.67.


May light crude was down 1.44 to 102.46.


My Most Active Stocks Index was down 11 at 280.


The Big Money Breadth Index was down 10 at 1018.


CRB Commodity Index was down 4.37 at 300.45.


The VIX up 1.58 to 20.39.


Permanent Portfolio Fund (PRPFX) was down 0.04 to 48.08 (previous day closing). YTD Return: 4.32%.


Late Notes -- After yesterday's dreadful performance, we got the remains today -- Dow down as much as 205, but a late sell-off (surprise) left the Dow down on its fannie -- down 213 at the close. Could the Fed be buying stocks? Japan's central bank bought stocks when needed, and I don't doubt that the Bernanke Fed would buy the Dow in a pinch -- so nothing should surprise us. Ben, gas up the helicopters!


Dec. gold was up about 17, (despite the strong dollar) and I'm thinking that a lot of the Johnnie-come-lately crowd who bought gold for a quick profit are now on the sidelines -- and licking their wounds. The gold bull market remains intact. And it's eleven years and counting. This could be the longest bull market in duration in history.



Nice e-mail below, and this kind of message makes me feel that I'm not wasting my time.


Dear Richard,


Just renewed my subscription after a lapse of a few years, as basically I agree with your analysis so I figured your work was redundant. But I’ve renewed as I saw your comment on Richard Duncan’s new book. Then I remembered your touting of his first book, "Dollar Crisis." Then I remembered after reading this book I loaded up on gold bullion (at about 350 an ounce), and started buying rare and ancient gold coins which developed into a thriving business for me. I had forgotten I’d read "Dollar Crisis" on you recommendation. I’d like to thank you belatedly. And I’m happy to be reading your fine work again.



Jeff K.



PS I still think you’re crazy to live in San Diego.



Russell Comment -- Thanks Jeff. I've received dozens of kind e-mails from subscriber along with many books. I just hadn't had the energy to answer each letter, for which I am sincerely sorry. I've been deep in studying the metaphysicians of the 1930' and 1940s (Emmet Fox and Florence Shinn and this, along with my market work and my broken hip have kept me very busy (I also lack the energy that I used to have).