Richard Russell – The Financial System Has Been Destroyed

Tuesday, November 5, 2013
By Paul Martin
November 5, 2013

With continued chaos around the world and uncertainty in global markets, today KWN is publishing a powerful piece that was written by a 60-year market veteran. The Godfather of newsletter writers, Richard Russell, warns that “the present system has, in effect, been destroyed.” Russell also revisits a remarkable prediction he made 56 years ago. What is so astonishing is how his prediction is coming true once again, this time nearly 60 years later.

Richard Russell: “My thoughts go back to 1957. I wrote my first article for Barron’s in December of 1957, in which I noted that we’d never had a third speculative phase in that bull market. Soon a vicious recession was on, and everybody was bearish. I predicted that despite the recession, we would see a speculative third phase in the secular bull market. The third phase did come, and my forecast proved correct.

I’m wondering whether the same situation exists today, with the speculative third phase somewhere in our future. Despite the sluggish GDP, I believe you will see a third phase speculative blow-off in this bull market. Often in a bull market’s third phase, profits are larger than anything seen during the first and second phases of the bull market. For this reason, my current thinking is that subscribers should hold gold and DIAs. The last thing investors are expecting now is a profitable third phase explosion in stocks, and perhaps something close to hyperinflation in the money market.

I believe you see a phenomenon where increasingly bullish retail buyers are coming into this market, while at the same time institutional money is taking profits and moving to the sidelines. I expect this action to accelerate in the coming months, leading to an upside boom in stocks, along with a good deal of churning action. It is now recognized that the forces of deflation are pressing down on the US economy, and that more QE will be needed. This will halt deflation and gradually lead to inflation, finally being expressed as a boom in the stock market.

Thus the great bull market will end as all bull markets do: with a massive entrance of the retail public and subtle distribution by institutional money. Our subscribers’ choice: going into what appears to be a growing stock market bubble, or remaining in the universe of gold, which is acting as though it is at a bear market bottom.

The Rest….HERE

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