Richard Russell Slams Robert Prechter, Praises Gold, Tells Readers To Get Out Of Stocks

Tyler Durden's picture

Richard Russell tells readers how he really feels. And, yes, the bear slams everything fiat and tells readers to leave stocks and go into gold.

The specter of deflation is cropping up in many media outlets today. In fact, I'd say that deflation talk has almost become popular. The key question is this -- Fed Chief Bernanke is obviously reading and hearing all about the "coming deflation." What will Bernanke do about it? I think he will fight deflation with all the weapons at his command. And Bennie has a lot of weapons, least of which is printing "money."

...Then (believe it or not) in the same issue of Barron's we see an article by my old friend, Robert Prechter, the guru of the Elliott Wave thesis. Robert explains how a great contraction in credit and debt will bring about deflation. Robert notes that the amount of dollar-denominated debt worldwide is some $57 trillion. . . The already-issued debt and potential debt is poised to overwhelm the possibility of management monetization. The Fed's assets amount to $2.3 trillion, a drop in the global debt bucket."

Robert concludes his frightening article as follows -- "If you are positioned for more inflation -- as the vast majority of investors are -- you are likely to find yourself on the wrong side of the monetary bet. Positioning for deflation simply means avoiding traditional investments, especially risky debt, and maintaining maximum safety in cash equivalents, held in the safest institutions. If you shed market and institutional risk, you can sail through deflationary times unscathed."

Russell Comment -- Whew, how's that for a scary contrary opinion? Robert believes that way to safety in a deflation is to have cash, and lots of it. My concern with this approach is that I question the safety of the US dollar (and all fiat money, for that matter). So in an all-out deflation, Robert Prechter will be sitting in all cash or US Federal Reserve notes. But the dollar is collapsing, and with a US that is deflating, none of our foreign creditors will want dollars (in fact, they will be trying to get rid of dollars). With fiat money in retreat all over the world -- and currencies devaluing against each other, the world's peoples will turn to the only money they can trust -- gold. I'm aware that Prechter believes gold will be heading down in a deflation, I disagree.

I was there during the Great Depression, and I can tell you nobody at that time had dollars. But if you did have dollars they were trusted and they were considered as good as gold. Today, it's different. The very validity of the dollar is in question.

...I distrust all scenarios and predictions, although I read 'em all and find many of them fascinating. In the end, I only trust the wisdom of the stock market. I haven't liked the recent action of the stock market, and I've advised my subscribers to get out of stocks.

Courtesy of King World News.

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firstdivision's picture

Leo, how did your buy on yesterdays dip work for ya. My TZA purchase worked quite well.

johngaltfla's picture

Nicely done. And a nicely executed comment.

Gully Foyle's picture

Automatic Earth finds safety in cash during Deflation.


chrisd's picture

I agree. It is hard to understand what other currency people will flock to for safety. Not sure there are enough CAD, NZD or AUD to go around. If it really gets to a point where no fiat currency is worth anything and everyone needs gold, I would be more concerned that the person I am trying to trade with will shoot me as soon as I turn around.

Gully Foyle's picture


I would advise that you don’t keep everything that you have in one location. I was forced to leave my house and take off with just my backpack and weapon. If you can, keep a bug out bag [cached] a few miles away from your house so that you could go to it, if you are forced to abandon your residence. Be prepared to not return to your home for years and try to have another place to live in another part of the country or even some other country. I was not able to go back to my home until years later. Stash as much ammo in different locations as you can. I did not have enough ammo in the first place and whatever I had was used or traded within first month of me leaving my home. Ammo was good trading currency and could get you a meal at any time. Local paper currency was basically worthless but if you had foreign currency, then you were in better shape. At that time German Mark was most popular currency in Europe and could get you anything in former Yugoslavia during the war. The Gold and Silver were good to have but it was harder to find someone that would accept gold and silver as form of payment .

augmister's picture

Don't forget the "new" precious metal, LEAD!

freshman's picture

When all fiat currencies get thrown out, guns would be more valuable than gold. The guy with the most gold would be in most vulnerable unless he also has loads of guns. I would rather have no gold, but with guns.

jeff montanye's picture

if fiat currencies are worthless then the balkan/argentinean scenario becomes dominant. however if we are talking worth less, aka the 1930's, then portfolio management still is a viable option.  and gold/gold miners may be useful/lucrative again (barring seizure in the case of the former, confiscatory taxation, etc. for the latter).  vote your pocketbook.

24KGOLD FOIL HAT's picture

JM: I agree the $ will be worth less.  Martin Armstrong has several recent reports and he calls for some big changes but not Mad Max in the USA.  Armstrong also sees gold as the main answer.  I like MRE's and Glocks too.

TheWord's picture

In the recent past, there has been hyperinflations in subsidiary currencies.  The only serious currency I can think of which has experienced deflation in their own economy (in recent times) is Japan, but that was accompanied by large external surpluses and internal "surpluses" (in the form of private savings).

There has not been a hyperinflationary event in the reserve currency for centuries (mainly because gold was the reserve currency for centuries).  Should the $US undergo even a mild hyper-inflationary event, the dislocation (not to mention the OTC derivative carnage) would be very severe.

tmosley's picture

Right, because apparently the earth existed in a state of anarchy throughout its history, until the holy fiat standard came into existance.

Come on, guys.  There have been dozens or hundreds of instances of fiat currencies collapsing, and there have been very few instances where a, guns were more valuable than gold, and b, where everyone went batshit insane and just started killing their neighbors for no apparent reason.

I mean, come on.  If the dollar collapses, you really think the people of the world will be so stupid as to purposefully transition to ANOTHER fiat standard?  No, that's just dumb.  If the dollar fails, the world will return to a gold standard.  Period.  Further, it'll be at least a hundred years before any nation attempts to go back to fiat after that event.

dnarby's picture

You mean when, naturally.

GoinFawr's picture

Whoa, easy there chrisd.  So if gold is considered a more valued currency than bits of printed paper everyone will be shooting each other in the back? Alarmist much? Why is it always the worst case scenario that must occur with you paper bugs?

Instead of your doomsday myth how about this for when gold returns to its traditional monetary role in the minds of even the rubes: The average man will have more say than your average banker again, finally. And your gov't will be limited to living within its means, instead of warring all over the world on behalf of a handful of corporate interests on your dime and daughters/sons lives.

So, in summary, a return to the gold standard could make the world a much nicer, calmer place. Sure, a few eggs might get broken in the process, but if you want to make an omlette...


dnarby's picture

You are both making a critical error.

In the Great Depression, the dollar did well because it was freely exchangeable at a fixed rate for gold. In essence, it was gold.

In this Great Depression v2.0, the dollar is not gold.  It is fiat-debt.  It is freely exchangeable for gold, but at a variable rate, determined by people's willingness to use the dollar.

The massive coming deflation will be in terms of gold, not dollars.

taraxias's picture

I'm sure glad Stoneleigh put John Williams in his place <sarcasm off>

Gully Foyle's picture


We all have those we agree with and those we disagree with. Essentially we play favorites and disregard any facts that don't fit our preconceived patterns.

We will not know the truth except via hindsight.

I would appreciate you counter posting on Automatic Earth. We can observe your exchange with Stoneleigh if you notify us.

Really why make a sarcastic post unless you have enough information and skills to argue your point in depth with the source.

taraxias's picture

I don't post on AE. Run for the hills, create a community and grow a garden IS NOT A SOLUTION.

I've been posting this on Mish's site for some time, I'll repeat it here, in a fiat monetary system DEFLATION IS A MYTH. Oh yes, I know, my million dollar home is now worth $700K .........but still up from the $500K purchase price some 10 years ago. Deflation indeed.

Can you refer me to one single example where an economy collapsed because of deflation EVER in recorded history? Oh, I know, this time is different.

malek's picture

> Can you refer me to one single example where an economy collapsed because of deflation EVER in recorded history?


Then only a few extremists believe in possibility of a total deflationary collapse.
But this still leaves room for a nice deflationary Great Depression as an option for the more reality based thinkers. Unlikely IMHO, because of helicopter Ben, but possible.

akak's picture

Can you refer me to one single example where an economy collapsed because of deflation EVER in recorded history?


Deflation under a fiat currency regime is nothing but a myth and a lie, propaganda from the powers-that-be to confuse and misdirect the ignorant masses.

currency conflagration's picture

Use your heads people.  WHO is the FED concerned about saving --  Sheeple or banks.  The FED is throwing the deflation bogey to scare everyone enough that they will be OK with QE2 ... QEinfinity. 

DEFLATION KILLS LEVERAGED BANKS (our fractional reserve banking system) BUT is good for consumers that are not overleveraged!

currency conflagration's picture

Use your heads people.  WHO is the FED concerned about saving --  Sheeple or banks.  The FED is throwing the deflation bogey to scare everyone enough that they will be OK with QE2 ... QEinfinity. 

DEFLATION KILLS LEVERAGED BANKS (our fractional reserve banking system) BUT is good for consumers that are not overleveraged!

Internet Tough Guy's picture

Prechter deserves it. He was saying sell gold at 300, 400, 500...still saying it at 1200.

And E wave = phrenology.

Young's picture

Scary contrarian indicator that Bob Prechter gets space in Barrons...

MarketFox's picture

A blabby way of....

hoping to stay relevent in media...

"hoping to attract some ears and eyeballs"...

And a blabby way of saying ..."I do not know either"....

Turd Ferguson's picture

Prechter is nothing but a 2bit shill and a con artist.


Tense INDIAN's picture

i wonder how many con artists are there who are playing "real life characters " in the mainstream life .........Britney spears, Lindsay Lohan, Miley Cyrus, Cristina, Tiger woods,


these are the people employed by the CIA just to keep the Sheeple distracted and Happy....their private life is constantly used for HEADLINES....last year just as the COPENHAGEN TREATY ( Climate gate ) scandal broke out , we had the Tiger Woods scandal the very next day...or may be a day later.........

reading various articles u will often find that some writers are infact trying to Fool people..


these people need to be commended ....they have surrounded us with DECEPTION..

HORUS ( the sun god of Egypt) and his minions

ElvisDog's picture

Hey, how do I get one of them super-secret CIA distracting-the-public jobs?

Tense INDIAN's picture

u defintely have to be a HOMOSEXUAL and be ready to be subjected to all kinds of sexual perversion so that u know longer have any feelings left in u...a child molester......


these are the least things u need to have.........i can guarantee u that the CIA doesnt trust people with even a little bit of HUMANE in them.....any way ...enjoy LIndsay lohans pictures with that GOAT:

N.B: Alex is a ZIONIST SHILL but he picks out some good materials now and then's picture

You sound kind of nuts (no offense) but those pictures of LL certainly do make a point of piling on the Masonic symbolism. It's bizarre.

For the life of me I can't understand how anyone can find LL to be attractive or interesting. The vibe I get from her is: diseased.

Geoff-UK's picture don't call the CIA, they call YOU.

Infinite QE's picture

Dead on my man! I've felt for a while that he's a shill propped by the boyz in order to suck in the simple minded and create volume.

LeBalance's picture

I can fit your functional form with a N-d meaningless polynomial and call it science, too.

As in: I agree.

macroeconomist's picture

Ben WILL GO MAD to prevent deflation. Here is what he thinks again:

" Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation."

And if that's not convincing enough:

""The Fed can inject money into the economy in still other ways. For example, the Fed has the authority to buy foreign government debt, as well as domestic government debt. Potentially, this class of assets offers huge scope for Fed operations, as the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt."

"One important concern in practice is that calibrating the economic effects of nonstandard means of injecting money may be difficult, given our relative lack of experience with such policies. Thus, as I have stressed already, prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation"

IS it going to work? If Ben knows what he is saying, IT WON'T:

"The claim that deflation can be ended by sufficiently strong action has no doubt led you to wonder, if that is the case, why has Japan not ended its deflation? The Japanese situation is a complex one that I cannot fully discuss today. I will just make two brief, general points.

First, as you know, Japan's economy faces some significant barriers to growth besides deflation, including massive financial problems in the banking and corporate sectors and a large overhang of government debt. Plausibly, private-sector financial problems have muted the effects of the monetary policies that have been tried in Japan, even as the heavy overhang of government debt has made Japanese policymakers more reluctant to use aggressive fiscal policies (for evidence see, for example, Posen, 1998). Fortunately, the U.S. economy does not share these problems, at least not to anything like the same degree, suggesting that anti-deflationary monetary and fiscal policies would be more potent here than they have been in Japan"

LeBalance's picture

You need to insert Ben laughing like a maniac at various points in your discourse, or maybe:

Have a strange day.

longjohnshorts's picture

Seems to me that Benny equates inflation with growth; hence, his desire to avoid deflation.

Creating inflation (by printing money) would only make things worse by putting more real goods outside the reach of consumers. That will further depress consumption, defeating his goals.

The only sensible long-term solution is abetting the creation of meaningful jobs. This is extremely difficult when we have cheap imports flooding in, particularly from a country that manipulates its currency. It also is difficult when subsidized private investment firms have a financial incentive to lower the operating costs of acquired manufactured companies by moving them offshore.

OpenEyes's picture

"I was there during the Great Depression, and I can tell you nobody at that time had dollars. But if you did have dollars they were trusted and they were considered as good as gold. Today, it's different. The very validity of the dollar is in question."

That's the real crux of the issue.  In 1932, dollars were scarce, but they were, in fact, 'good as gold' because they were backed by gold.  Dollars are no longer the safe haven that they were back then.  Since 1971 dollars are no longer backed by any gold.  Some people who consider themselves to be experts on the great depression have surmised that people ran to the dollar for safety.  Nope, they actually ran to GOLD.  The dollar was a good substitute because it was backed by gold.

jeff montanye's picture

true in some sense; however it is worth mentioning how much gold by which the dollar was backed: $22 to the ounce of gold by the republicans going into the depression and its early years, $35 to the ounce after fdr got power (and required all gold bullion, non-numismatic coins, gold certificates to be turned in at the old price, invalidated all contracts specifying payment in gold, etc.).  a depreciation of over 50% is to be avoided if possible (american barrick stock worked well), even if the asset is still "backed by gold".

although bush/obama/paulson/geithner/bernanke far outdo fdr in their debasement of the currency and the sovereign debt, obama's political/economic timing more nearly resembles hoover's than it does fdr's.  thus, perhaps, the fortunes of someone like ron paul may be rising (along with, say, sarah palin -- shiver).  time will tell. 

malek's picture

Lots of people going through currency events would have been very happy with suffering only a 50% haircut.

ctiger2's picture

USD wasn't redeemable in Gold though. It was however redeemable in Silver. The saying goes "Cash was King" in the Great Depression. Cash=Silver. Silver was King.'s picture

As Frank L. Baum pointed out, the silver slippers can get you back home any time you want.

bugs_'s picture

well at least putting prechter down isn't unusual, uncertain, or unexpected.

go with what you know!

russell says get out of stocks, prechter says get out of stocks


Rogerwilco's picture

The USD is the last domino. A little gold and silver are fine as insurance, but anyone who thinks gold will preserve wealth in a meltdown is deluded. Look back through history and you'll see that windfalls are taxed heavily, and "hoarders" are punished for their thrift.

Prechter sees gold in the correct context. It is a stupid investment vehicle, but there are times when it (along with food & ammo) comes in handy.

Waterman Jim's picture

+  if demand is up now for bonds imagine what it will be if we spiral down.

that only makes the dollar stronger.  the actual dollar is scarce and real if it is in your hand. the 56 trillion of debt is virtual.

at the bottom of the deflationary spiral is where you buy gold.

the elliot wave is great stuff, but it doesn't factor in manipulation, thats not preachers' fault.


if we go into hyperinflation i think it will have to happen before or after a deflationary period not in the middle of it.







ozziindaus's picture

but it doesn't factor in manipulation

The Elliot Wave principles are based on human psychology and herd mentality. As long as humans have a hand in the manipulation, then it is being considered. Also, covert manipulation has it's boundaries in respect to social policies. It's really social mood that drives the markets and public policies through politicians. 

The series of events IMO is as follows:

Public Sentiment is reflected in the USG Bond Market which drives the Equity Markets (less corporate bond liquidity) that lead the Economy. 

akak's picture

"...but anyone who thinks gold will preserve wealth in a meltdown is deluded."

Your lack of historical and economic knowledge is breathtaking.

StychoKiller's picture

After the US runs the WORLD Economy into the ground, just who will be stupid enough to believe that they have any Authority/Credibility left to start confiscating Gold/Silver?  Gregg Allman was right, the best time to leave is:  "Just before the bullets fly!"

Bill Lumbergh's picture

For those that follow cycles, the Kondratieff Wave shows that during the Winter season equities will fall due to deflation yet gold should rise on a relative basis.  No two times are exactly alike but for me that is the most compelling logic of what should occur over the next decade.

johngaltfla's picture

And was not the economic theory of the wave based on gold backed currencies? Yup, that's right. So take the "wave" with a grain of salt.