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Will the U.S. and western nations be forced into a double-dip deflationary recession?

*Dow Theory Letters, by Richard Russell, June 28, 2010

”My investment strategy is now being voiced or followed by too many major hedge funds.  The thinking is that as vanishing stimuli and de-leveraging takes over, the economies of the world pressured by central bank conservatism will force the US and western nations into a double-dip deflationary recession.  The response will be to keep rates at zero and open the money spigots wide, wide, wide.  This is where ownership of gold ‘was supposed to’ come in.

Then, I ask myself, is this scenario too pat?  Is it too popular?  There’s always a fooler.  Where’s the fooler this time?  I think the fooler will be the stock market.  The stock market will be considerably worse than the smart boys are figuring on.  Deflationary pressures will be severe and the need to re-inflate will be more pressing than ever.

Gold will be needed — not as a safe haven against inflation, but as a safe haven against crushing deflation.  Deflation will flatten everything in sight including base metals, commodities, housing, job creation.  The single island of preserving wealth will be gold.  Unlike junk fiat currencies, gold cannot be devalued.

As I look ahead, the area that the experts do not understand is the stock market.  Almost all the current opinions revolve around stocks remaining in a high-level trading range.  This will prove to be an horrendous miscalculation.”

”My position — Own gold and gold items and cash. Write this on your blackboard ten times.”


*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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