Richard Russell has grown very vocally bearish in recent months. Earlier this year, Russell warned that the stock market was once again becoming grossly overvalued despite its relentless new highs.  He has maintained that the bear market never ended and that the world is far too indebted to exit the bear market.  He also believes the bear will not end until all fiat currencies have failed.  Although I disagree with him on many aspects of the micro I agree with his larger macro outlook.  This bear market is not over.  The secular bear market lives on.  Mr. Russell thinks we might be on the verge of a terrible collapse:

“We’re now in the process of building one of the largest tops in stock market history. The result, I think, will be the most disastrous bear market since the ‘30s, and maybe worse.

Question: “What could possibly be behind such a bear market?” you ask. “The stock market is stirring up optimism on a weekly, if not daily basis, by not falling apart.”

Answer: This is the “rest” or “dead zone” I was talking about. Bear markets don’t conclude in a day, a week or a month. Months will go by, often adding to the bulls’ optimism.

I think the key element behind this great bear market will be the complete destruction of all fiat currencies. This has been a long time coming. Fiat currencies are “wealth” created by man. They are created without sacrifice, without labor, without risk, and without sweat. Basically they are an immoral device, created by secretive bankers.

If you watch the figures carefully, you’ll note the subtle deterioration. For instance, the advance-decline ratio, although up slightly for the week, had a relatively weak performance with the Dow up several hundred points over the course of the week. And we broke the trendline in May (see the chart below showing the cumulative advance-decline line for NYSE Common Stock only, which is what we publish in our figures (courtesy of DecisionPoint — The vertical lines are Jan 2008, Jan 2009 and Jan 2010 as you move to the right on the chart.

My old friend, Bob Prechter, is talking about Dow 400. I used to think this was an absurd joke. I no longer think it’s a joke. The ultimate result will be a primary bear market shocking in duration and extent.

Gold: As for gold, its stellar performance goes on. This in the face of ominous warnings of various worried experts. On Friday, August gold rose to a new record high. The next step will be into the 1300s — point&figure upside objective is now 1310.

Gold shares are lagging bullion in this last move, not yet showing the break-out seen in the yellow metal.

The world (minus the US) is loading up with the yellow metal with banks running out of vault space. The great 10-year primary bull market is moving into its 11th year. The bull market in gold attests to the systematic decline in the value of the dollar compared with real money – gold.

One of the greatest modern traders, John Paulson, who made billions on the housing collapse, has, I understand, all his personal money in gold-related items. Many of my subscribers have now built gold profits beyond anything they have ever achieved before. I know at this point one could get itchy fingers thinking of the profits achievable by switching gold for fiat currency. I warn subscribers, stay on the yellow brick road. The big profits, the astounding profits, will accrue when gold finally bursts loose of its prejudices and freely expresses itself.

My advice now is to put as much of your money as you’re comfortable with in bullion coins. Remember the simple phrase that’s been around through years of history – “There’s no fever like gold fever.” Fiat money is doomed. Act on it.”

Source: Dow Theory Letters

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  1. In Germany in 1923 and again in 1948 when the currency collapsed, no one wanted gold, cigarettes and whiskey became the currency. Bullets and the means of delivering them were available, but they were not widely used, most people do not choose to resort to violence.

  2. Pic

    The day will come when a bushel of wheat will be
    worth more than a bushel of gold – Brigham Young

    I lived during the depression of the thirties. We had a
    cow, pig, chickens, a large garden and my mother knew how
    to can food and cook. My grandmother had a small farm 40
    miles away. The winters were tough, no power, tv or computers.
    WE SURVIVED!!and we always helped others. I am a much stronger
    person now, and a veteran.

  3. It is obvious that there are a bunch of OBAMA dream bats in this comment column. Just remember, in Communism, the first to go are the supporters of the idiot.

  4. Hi!, Ladies & Gentlemen:
    Reasons to purchase gold & silver can be seen in our study of Greshams Law which U can find either on the Net. or in your dictionary.
    Eastman Kodak has been a primary consumer of 999.99 Industrial Silver in silver haloids (forgive my spelling please) used in their production of colored film. Out of one troy oz. of Industiral Silver they can produce more than 5000 colored films for our home picture alblums etc.
    One troy oz. of Industrial Silver can be used in the Electronics Industry to produce a fine wire used in a multitude of electronics devices to carry electrical current that is 50 miles long.
    We all know of someone who has been to their dentist to have gold crowns fitted to help their teeth and who hasn’t at one time or another worn some gold based jewelery? Pluss some people are required by their optometrists to wear gold framed glasses.
    It seems unlikely to me that our world will soon loose out on finding useful applications for both these very precious metals without which our world wouldn’t be the same potentially wounderful place we are looking forward to claiming, after all the monetary dust etc. settles & life takes on a clearer view of our future enhancements of civilizations worldwide!
    Hang in there everyone & be kind to each other. We are each here for only a little while & it’s just as easy to do good as it is to do bad encluding the time it takes to accomplish either.
    RUSS, California

  5. Nothing new under the sun, but it does continually transmute. For our entertainment. Gold is a store of value and is internationally recognized and accepted. Fiat currencies fail on one count or the other sooner or later, or always have throughout history. The greenback itself has lost 93% of it’s value against gold since Roosevelt’s time.
    On a different note we must consider this:
    Cooperation and compassion = prosperity and heaven on earth
    War and avarice and greed = hell. We are all authors and actors. Choose wisely,for there is no escape from the consequences.