If the market is topping, it’s doing so in the face of rosy news in every area except for employment and there is nothing more ominous than a stock market turning down in the face of a “bright” economy. At such times, nobody is ready or positioned for a sudden reversal. [Are you?] Words: 637
In further edited excerpts from an article* by Prieur du Plessis (www.investmentpostcards.com) Richard Russell has the following to say in his latest Dow Theory Letters:
(1) Goldman Sachs – Dumb and Decent or Smart and Sleazy?
The “smartest guys on Wall Street,” are under siege. What’s the complaint? These guys sold poisoned pill-products to their customers, and then made billions of dollars selling short the products they sold to their customers. Goldman has to decide whether to plead dumb and innocent or smart and sleazy. Of course, they’ll plead dumb and decent (“they had no idea of what was going on”).
(2) Gold – The Only Safe Currency?
Managers of sovereign funds don’t know where safety is. They know it’s not in euros, and they suspect it’s not in U.S. dollars. What’s left? Could it be that gold is no longer seen as “just another commodity,” but increasingly accepted as the “only safe currency”? China and Russia think so. I think so too.
(3) Sovereign Debt Bailout – Who’s Next?
[With] Greece’s [$162B] bailout, will Portugal and Italy and Ireland be next?
(4) Stock Market – Topping Out?
My suspicion that the stock market is tracing out a major top is becoming stronger. The stock market is loaded with amateurs who have been hoping to recoup their losses. If the stock market is actually topping out here, the public is going to turn black bearish. A major stock market decline now would play havoc with the still shaky U.S. economy.
(5) Real Estate Market – New Lows?
In the past month or two, many Americans have bought foreclosed property under the belief that real estate has hit bottom and finally turned up. The Russell opinion – if the stock market is topping here, I believe that the real estate market will sink to new lows (and this time we’ll see the commercial real estate market collapse along with the housing market). If you’re thinking of buying a real estate bargain, wait a while.
(6) Unemployment – Up?
If the stock market turns down here, unemployment will rise again. This will drive the Obama administration up the wall and scare hell out of every Democrat. The odds of cutting the national deficit will then be zero.
(7) Oil – Weakening?
Gold is rising in the face of weakening oil. It would be dramatic and bullish if gold detached itself from oil and all other commodities.
(8) VIX – Forecasting a Storm?
I’ve been saying, “After the calm comes the storm.” We’ve had the calm with VIX sinking into the 15 area but very recently, the VIX has risen to the 21 area, and this may be the early start of a coming storm.
(9) Gold and Cash – The Place To Be?
The action of gold during this period is superb. I’ve asked my subscribers to be in gold and cash, and to await developments. That’s still my preferred position – cash and gold.
Final message – gold and cash, cash and gold. This is not the time to be “cute”.
– The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
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