richard russell

  1. 1,380 Posts.
    November 10, 2003

    I often think that the best and safest and most intelligent thing to do in this business is to keep it simple. This brings to mind four basic theses that I adhere to --

    (1) Bear markets follow bull markets, and the greater the bull market, ultimately, the more drastic the bear market.

    (2) The action of the D-J Industrials and the D-J Transports taken together with volume indications tell you all you need to know about the market and the economy.

    (3) Russell adage -- The primary trend always takes longer to reach its conclusion than anyone thinks possible, and the primary trend always take an item further (up or down) than anyone thinks possible.

    (4) The only real monies are gold and silver as specified in the US Constitution. In fact, the Founding Fathers in the US Constitution warned against the use of paper money. In its effort to circumvent the US Constitution, paper money is now used rather than the metals, and in 1971 the last vestiges of gold-backing behind the dollar was removed. What goes around, comes around. In the end, paper money will destroy itself, and gold will again takes its place as authentic, intrinsic money and as a true store of value.

    I would like subscribers to keep numbers 3 and 4 firmly in mind. As I see it, the bull market in gold is going to be a long one, a difficult one, and one that will constantly be attacked by the establishment and by the various central banks.

    Obviously, the central banks want the peoples of the world to believe that the paper they grind out is real money. Gold represents an enemy and a danger to the central banks' propaganda. One of the cornerstones of real money is that it serves as a store of value, and clearly on this count alone paper money is a total fraud.

    Worse, in losing value year after year paper money robs us of our savings. The dollars I worked for and sweated for fifty years ago are almost worthless today. If the government was honest which it isn't, to pay off its deficits it would raise taxes. But raising taxes is a political bombshell, so the palatable alternative is inflation. And, of course, the Fed is a willing provider.

    If you and I did what the Fed and government does, which is rob us of the fruits of our labor, we'd be thrown in jail. But the Fed and the government do it slowly, and thus the public never fully realizes what's happening.

    Inflation is like the frog in the cooking pot. The fire is under the pot, the water warms, and the frog feels great. The water get hotter and the frog starts sweating, but he still feels good. Then the water turns really hot, but by now the frog is so weak he can't jump out of the pot. A little later the water starts to boil, and the frog is in frog heaven. That's the way inflation works. We're at the early "warm" stage now.

    Richard Russell’s Dow Theory Letters
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