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Why is one of the world’s top investment gurus staying with T-Bills and physical gold right now?

*Dow Theory Letters, Richard Russell, February 23, 2006

“I’ve had to learn this lesson the hard way, and any time I’ve ignored this lesson I’ve spent sleepless nights playing the “tossing game.” I’ve learned that it’s a lot easier to exit the market when market action isn’t in harmony with my scenario than it is to sit tight and hope. Fighting the market when the action isn’t going the way you want it to — is a sure ticket to patched pants and a shrinking bank account.

For instance, there’s a lot about the current stock market that I don’t care for. I’ve listed the items that bother me many times over. Nevertheless, the stock market, or at least the major averages, have been pushing higher, and except for my energy and gold shares, the major stock averages have been pushing up without me.

Physical gold I place in a separate category. I don’t care which way gold goes, I’m staying with it. I’m staying with it because the US had trillions of dollars in debts and liabilities and unless the US reneges on those debts and liabilities (I can’t see that happening) it will have to print the paper to finance this mess. This will mean inflation and pressure on the dollar. My defense against a declining dollar or possibly a collapse of the entire fiat currency system is gold.

Meanwhile, T-bills are becoming increasingly attractive. It’s no punishment to hold T-bills today, although this was not true two years ago or even a year ago. The yield (free of state taxes) on a 91-day T-bill is now 4.56%, and if I want to go out six months the yield climbs to 4.68%. And that’s fine with me. After all, that’s better than twice the skimpy 1.85% yield on the S&P — which means that if I buy the S&P (SPX) I’d have to pray that the market will climb higher, higher enough to compensate me for the risk of buying the S&P at a fat 18 times earnings with almost no yield. Aw, why should I deal with stress — I’ll just buy the T-bills and sleep tight.”


*This information is solely a highlight of the opinion of a third-party publication and is incomplete.  Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

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