Richard Russell: “Debt balloon moving closer to its fate – a pin”

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Writing from rehab (after a hip replacement operation), 86-year-old Richard Russell of Dow Theory Letters fame said: “The world’s inflated debt balloon is moving ever closer to its fate – a pin. Anybody younger than 80 years old is used to viewing the markets like a rubber band; stretch it one way, and it will always bounce back. That’s the widespread thinking and acting. If a correction comes, don’t sweat it, the markets will come back and end up higher. That’s been the story and thinking since the year 1900.

“I’m saying that the economy and the markets have lost elasticity. We’re moving into the period where the markets will go down but they’ll no longer act like a rubber band, they won’t bounce back. This period lies ahead one or two years, or possibly even three. For this reason, timing, or when to buy bargains, is antique thinking. The big picture trumps all timing methods. The strategy now is to get out of debt and accumulate eternal wealth, which is gold and gem-quality diamonds.

“Federal Reserve money pumping has equated with a rise in stock market and numerous bubbles. When the Fed stops pumping the markets stall, as they are doing now.”

Source Richard Russell, Dow Theory Letters, November 18, 2011.

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