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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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Wed, 08/11/2010 - 09:25 | 514962 firstdivision
firstdivision's picture

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

Wed, 08/11/2010 - 11:30 | 515253 johngaltfla
johngaltfla's picture

Nicely done. And a nicely executed comment.

Wed, 08/11/2010 - 09:26 | 514966 Gully Foyle
Gully Foyle's picture

Automatic Earth finds safety in cash during Deflation.


Wed, 08/11/2010 - 09:33 | 514977 chrisd
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.

Wed, 08/11/2010 - 09:39 | 514997 Gully Foyle
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 .

Wed, 08/11/2010 - 12:21 | 515486 augmister
augmister's picture

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

Wed, 08/11/2010 - 09:54 | 515022 freshman
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.

Wed, 08/11/2010 - 10:09 | 515054 jeff montanye
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.

Wed, 08/11/2010 - 11:40 | 515299 24KGOLD FOIL HAT
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.

Wed, 08/11/2010 - 10:02 | 515038 TheWord
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.

Wed, 08/11/2010 - 10:07 | 515049 tmosley
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.

Wed, 08/11/2010 - 13:19 | 515719 dnarby
dnarby's picture

You mean when, naturally.

Wed, 08/11/2010 - 22:59 | 515197 GoinFawr
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...


Wed, 08/11/2010 - 13:18 | 515716 dnarby
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.

Wed, 08/11/2010 - 09:56 | 515028 taraxias
taraxias's picture

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

Wed, 08/11/2010 - 10:11 | 515062 Gully Foyle
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.

Wed, 08/11/2010 - 10:45 | 515159 taraxias
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.

Wed, 08/11/2010 - 13:41 | 515789 malek
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.

Wed, 08/11/2010 - 13:59 | 515846 akak
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.

Wed, 08/11/2010 - 15:18 | 516079 currency confla...
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!

Wed, 08/11/2010 - 15:21 | 516096 currency confla...
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!

Wed, 08/11/2010 - 09:27 | 514967 Tense INDIAN
Wed, 08/11/2010 - 09:38 | 514992 Internet Tough Guy
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.

Wed, 08/11/2010 - 10:44 | 515155 goldfreak
goldfreak's picture

Prechter is a joke

Wed, 08/11/2010 - 09:28 | 514970 Young
Young's picture

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

Wed, 08/11/2010 - 09:33 | 514978 MarketFox
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"....

Wed, 08/11/2010 - 09:45 | 514979 Turd Ferguson
Turd Ferguson's picture

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


Wed, 08/11/2010 - 09:56 | 515024 Tense INDIAN
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

Wed, 08/11/2010 - 11:27 | 515248 ElvisDog
ElvisDog's picture

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

Wed, 08/11/2010 - 12:12 | 515449 Tense INDIAN
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



Wed, 08/11/2010 - 12:30 | 515528'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.

Wed, 08/11/2010 - 16:08 | 516316 Geoff-UK
Geoff-UK's picture don't call the CIA, they call YOU.

Wed, 08/11/2010 - 10:09 | 515061 Infinite QE
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.

Wed, 08/11/2010 - 10:24 | 515096 LeBalance
LeBalance's picture

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

As in: I agree.

Wed, 08/11/2010 - 09:35 | 514980 macroeconomist
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"

Wed, 08/11/2010 - 10:26 | 515103 LeBalance
LeBalance's picture

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

Have a strange day.

Wed, 08/11/2010 - 10:32 | 515119 longjohnshorts
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.

Wed, 08/11/2010 - 09:36 | 514987 OpenEyes
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.

Wed, 08/11/2010 - 10:49 | 515166 jeff montanye
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. 

Wed, 08/11/2010 - 13:43 | 515796 malek
malek's picture

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

Wed, 08/11/2010 - 11:05 | 515206 ctiger2
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.

Wed, 08/11/2010 - 12:46 | 515597's picture

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

Wed, 08/11/2010 - 09:38 | 514990 bugs_
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


Wed, 08/11/2010 - 09:39 | 514998 Rogerwilco
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.

Wed, 08/11/2010 - 10:21 | 515086 Waterman Jim
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.







Wed, 08/11/2010 - 19:49 | 516814 ozziindaus
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. 

Wed, 08/11/2010 - 14:03 | 515858 akak
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.

Wed, 08/11/2010 - 20:15 | 516860 StychoKiller
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!"

Wed, 08/11/2010 - 09:42 | 515004 Bill Lumbergh
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.

Wed, 08/11/2010 - 11:37 | 515281 johngaltfla
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.

Wed, 08/11/2010 - 09:46 | 515009 freshman
freshman's picture

Did Russel just give a doomsday scenari a few months ago and a bullish signal a few weeks back? Now he is bearish again? This guy needs some treatment.

Wed, 08/11/2010 - 10:28 | 515105 Waterman Jim
Waterman Jim's picture

yeah why listen to him, has he created a new form of technical analysis that's used by every major bank?


although i think hes right about the dollar, if we tank the actual dollar will be scarce.


Wed, 08/11/2010 - 11:32 | 515265 ElvisDog
ElvisDog's picture

He has whipsawed around a lot in recent years. I think the problem with his proprietary Primary Trend Index (PTI) is that it was designed for when humans traded stocks. I'm sure the Dow Theory signals are built into the computer trading algorithms rendering PTI bull/bear signals not as useful these days.

Wed, 08/11/2010 - 09:48 | 515016 jdrose1985
jdrose1985's picture

Lol sell stocks bc they're going down in DOLLAR terms is what this frail old popcorn fart is saying. Nevermind that doLlars will be relatively more valuable duh.

gonna have to trade out of dollars into strength, buy silver and energy, one would do well.

Wed, 08/11/2010 - 09:50 | 515017 eckart
eckart's picture

Deflation first, then hyperinflation...golds trend is up but it can still correct...Prechter, I believe, likes gold but not right here... which is fair enough

Wed, 08/11/2010 - 10:00 | 515033 taraxias
taraxias's picture


Prechter has been spewing his mouth about gold collapsing to the $400-600 range for two years now. I can't imagine what he would have said if he didn't like gold.

Wed, 08/11/2010 - 09:51 | 515019 John McCloy
John McCloy's picture

Prechter will be partially right. Of course gold will be impacted by deflation as all assets are however gold will likely be considerably higher at that point Everything ha changed for gold because we are at the moment of realization for the first time and collectively. This is the first moment that nations of this world have began to ponderbthe unthinkable and inevitable and that is all fiats will eventually collapse if backed by nothing. For the first time globalism has shrunk the world via information exchange speed and all the leaders of the world know it but simply do not say it but gold is money and these events have proven that true. So every nation for the next few centuries will understand the importance in buying as much gold as can be found and some may even buy gold mines assuring the nation and citizens are prepared for the day they all know is inevitable yet hope is not in their lifetime. All of this and we have not even priced in the decades of manipulation and lack of physical.

Wed, 08/11/2010 - 09:51 | 515020 Chippewa Partners
Chippewa Partners's picture

Richard, just walk down the street and jump in LaJolla Cove.  It will wake you up.  

Wed, 08/11/2010 - 09:56 | 515025 MarketFox
MarketFox's picture

Prechter ...

Is right about "debt destruction"...

And all that goes with it...

Poly govt. policy has shown its hand....

Wed, 08/11/2010 - 09:57 | 515030 Jason T
Jason T's picture

The only thing that gives the US $ value is our global military presance and central bank speculation.  The idea that our currency is backed by faith of the American people is ridiculous.  Baby boomers sure as heck really got us in a lot of debt.  $52 trillion!  Thanks.  I'll default please.

Wed, 08/11/2010 - 10:32 | 515116 Waterman Jim
Waterman Jim's picture

our dollar is backed by something and always will be. 

our sorry asses!


how is the debt payed back? with physical labor of the american taxpayers!


We are our own collateral.



Wed, 08/11/2010 - 10:41 | 515149 DosZap
DosZap's picture


What Physical Labor?.

Gotta have a friggin JOB before your an asset...........until then your ASS SITS.

If not, your a DRAIN...................and someone has pulled the stopper......

( POTUS just gave 26B to the Unions, and took away food stamps.)

That will go down well in the Barrio's, and welfare recips.....NOT.


Wed, 08/11/2010 - 10:07 | 515051 vainamoinen
vainamoinen's picture

Just remember - 60% of all wealth on earth is held in dollars. I own physical but its only logical that dollar wealth will be defended.

The game depends on it -

Wed, 08/11/2010 - 13:49 | 515819 malek
malek's picture

Uh-hum. How much of that is imagined wealth?

Wed, 08/11/2010 - 10:07 | 515053 gmak
gmak's picture


 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).


Deflating means fewer dollars = i.e. they are rarer and therefore in greater demand. Of course the foreign creditors will want dollars in exchange for their notes, because dollars will be worth more (if fewer, then buy more).



Wed, 08/11/2010 - 10:19 | 515084 Dragline
Dragline's picture

I agree with you, and also found that statement contradictory and nonsensical.

Wed, 08/11/2010 - 10:36 | 515135 Waterman Jim
Waterman Jim's picture

haha thats the dichotomy of the situation.  our creditors / TPTB want their money back but they dont want deflated dollars.


Wed, 08/11/2010 - 11:07 | 515208 oddjob
oddjob's picture

You foriegn creditors have dollars and will shove them down your throat at the worst possible time.Whats a couple trillion in cash anyway?.....certainly enough to bust the LBMA and the Comex in the same day.

Wed, 08/11/2010 - 10:08 | 515057 Infinite QE
Infinite QE's picture

Anyone who listens to Prechter deserves the arse fecking they've been getting and will continue to get!

Wed, 08/11/2010 - 10:12 | 515064 Jesse
Jesse's picture

Firstly, Richard does not 'slam' Prechter because he is a gentleman and doesn't really 'slam anyone.

But he is saying Prechter is wrong in his interpretation of how deflation will play out.  And he is saying almost exactly the same thing I have been saying, but in a slightly different way.

Second, what Bob Prechter does not realize is that a contraction in credit does not imply a one for one decrease in 'money' just as an increase in credit these days does not result in a one for one increase in money.

Third, even as the credit contracts, and the money supply contracts at some lesser rate, the 'basis of value' of the money is also contracting.  Since the US dollar is not based on gold, we have to look at what is providing the basis of its value.  And what are those things, and what is happening to THEIR value.

I don't know, cannot predict the future with certainty.  I don't even need to count on Benny to do his thing, although I am sure he will.

But there is a huge overhang of eurodollars out there, that are largely parked in Treasuries, and by buying the Three and Ten the Fed is monetizing them.  That should tell you a lot.

We can't detect this yet in the Fed Custodial accounts.  We do not have a reliable reporting of eurodollars because that is the one component of M3 that was discontinued by the Fed a few years back.

It is going to be a balancing act, and a race to the bottom.  That is why it is hard to predict.

What discredits Prechter is that he is using a model from the last crisis that was valid when the dollar was on an external standard.  AND even worse, he has been repeatedly wrong about gold for the past eight years and has never admitted or understood why, although to his credit he has been very right about Treasuries, and people should not forget that either.

Wed, 08/11/2010 - 10:36 | 515134 Graphite
Graphite's picture

Any discussion of whether Prechter is right or wrong on gold is entirely academic until the SPX gets back in the 800 or 900 area and the fear trade starts resulting in huge margin calls again. If gold holds up through that, Prechter is wrong. If it doesn't, he's right. And if stocks never go back there, obviously he's wrong about everything.

What kind of portfolio allocation to gold is Russell recommending at these prices? 100%? 80%? 20%?

Prechter's been saying "buy gold and silver anyway" ever since CTC came out, and some other EWI writers recommended a 10% allocation in a recent Barron's article. Hardly the stuff of blinkered, ideological gold hatred.

Wed, 08/11/2010 - 10:51 | 515168 taraxias
taraxias's picture

Tell you what, why don't we give Prechter until the end of time to see if he's right or wrong.

He's been flat wrong about where the price of gold is going for at least 2 years now. And if you traded based on his advice, you probably missed out on a golden opportunity (pun intended)

Wed, 08/11/2010 - 11:06 | 515201 Graphite
Graphite's picture

LOL what a great pun! Truly a rapier wit you're deploying there.

Of course, the gold bugs will be under no time or price constraints whatsoever for their predictions of imminent hyperinflation and $5,000/oz, and most of them only came out of the woodwork long after it had recaptured $1000, and almost none of them ever advise selling to take any kind of profits or actually make a "trade" out of a gold position.

Wed, 08/11/2010 - 11:22 | 515235 jeff montanye
jeff montanye's picture

remember that the last time we had a deflationary depression, 1930's, gold/gold stocks were a buy/hold from right after the first stock crash (late 1929/late 2008) to about three or four years after the stock recovery (1936/2015-6?).  also remember the stock market operator's (mentor's) advice about (not) selling in a bull market: "but then i would lose my position".

Mon, 08/16/2010 - 07:41 | 523553 QuasiYoda
QuasiYoda's picture

hi jeff

But you must also remember that during that deflationary depression gold WAS money as the dollar was backed by gold. And debts had to be paid in Gold or Gold backed Dollars!  The only way to get more dollars was to get more gold or devalue the dollar which is what Roosevelt did.

Currently that is not the case.  The reason for a Deflationary Depression is a preceding massive Credit Bubble which we have now . . .   in Spades.   And that credit is expressed in Dollars  . . . not Gold.  Which means that debt must be paid off in Dollars.  Finally the most recent Deflationary Expression or Reaction to that credit bubble was in 2008-09 and Gold sold off significantly.  WE seem to be on the Cusp of the next major reaction. 

As such I expect gold to sell off significantly 20 % or more.  Though if it tests it's highs first in this seasonally bullish period (For Gold) I won't be surprised.  And I do acknowledge the possibility that people turn their backs on their debt and take their cash and buy gold instead.  Basically I believe there will be one more opportunity to accumulate gold at better prices but acknowledge real possibility that we have seen the lows of this cycle. 


Wed, 08/11/2010 - 19:08 | 516740 ozziindaus
ozziindaus's picture

Tell you what, gold has behaved exactly as it always has and that is it maintains purchasing power. The problem with gold bugs is that they insist it's purchasing power should quadruple as with $5000/oz. That's not prudent, wise or even clever, it's greedy. 

PS golds purchasing power is already on the high end which validates Prechters argument that it's overpriced. 

Wed, 08/11/2010 - 19:02 | 516730 ozziindaus
ozziindaus's picture

Second, what Bob Prechter does not realize is that a contraction in credit does not imply a one for one decrease in 'money' just as an increase in credit these days does not result in a one for one increase in money.

No it doesn't but it does imply something worse, it's leverage. 5% down is a 20x leverage. 0% down, as in credit card, is an infinite leverage so with credit contraction, the money multiplier vanishers. Add to that default, and the money supply shrinks with the leverage passed back to the creditor. But worst still is this. The USD is the most expanded currency in history and will most likely contract the most. It still remains the reserve currency, most trusted and backed by the largest economy and military. My bet has always been with Pretcher but your articles are tops on my list. 

Thanks again for a great job and invaluable public service you provide. 

Wed, 08/11/2010 - 10:19 | 515081 RSDallas
RSDallas's picture

The dollar will soar when the contagion spreads throughout the entire market.  You have to back somebodies currency.  Until then it's just a bet.

Wed, 08/11/2010 - 10:32 | 515121 Cursive
Cursive's picture

Meh.  I wouldn't say that was a "slam".

Wed, 08/11/2010 - 10:35 | 515129 DosZap
DosZap's picture

"And Bennie has a lot of weapons, least of which is printing "money."


BS, Bennie's only WEAPON LEFT is the Printing Press............

Deflation, then Hyper Inflation.

When people start as a Matter of Fact, start printing articles in MSM Mags, calling the US economy BROKE, and a Mickey Mouse Economy.

It's just common sense that the worlds soverigns, will PAY attention..

IF we have ZERO confidence in our Fiat Ass Wipe......Should they?.



Wed, 08/11/2010 - 10:58 | 515187 contrabandista13
contrabandista13's picture







Best regards,



Wed, 08/11/2010 - 11:01 | 515192 the grateful un...
the grateful unemployed's picture

Prechter is the heavy weight in this battle, Russell is a good guy, whose Dow Theory interpretations are one dimensional and outmoded. In a time when most technical analysis doesn't work, the wave theory is still reasonably valid, even if it doesn't provide much for the trader.  Prechter has been proven correct on just about all of his predictions, including a collapsing stock market against a rising dollar. 

The point on contracting debt is simple enough, every new dollar of debt monetizes, and in turn leverages those new dollars created. Reverse the system and you have problems. Prechter does recommend holding physical gold. If you want to read his free report on Gold and stock market go download it, he puts lots of historical perspective on the relationship. In the first Great Depression money simply disappeared. That's not going to happen this time, but confidence in the system is important. 

As Alan Watts once said, the Great Depression was a moment when people couldn't agree that 12 inches equal one foot. 

Wed, 08/11/2010 - 11:03 | 515203 Übermensch
Übermensch's picture

Asset price deflation along with cost push inflation... "It's a beautiful day in the neighbour hood..."

Wed, 08/11/2010 - 11:04 | 515205 chrob
chrob's picture

interesting article on the implications for gold of the Fed's decision yesterday:

Wed, 08/11/2010 - 11:26 | 515237 Saxxon
Saxxon's picture

Wow, I have a lot of respect for Russell and Prechter; this is a clash of titans here.

I'm glad I don't have to Be Right before tens of thousands of readers.

 They're both correct; unless you are a bank casting around for a place to park one hundred million, then hell yes cash is great. Gold is also going to work great. There's a barbell for you!

Wed, 08/11/2010 - 11:24 | 515242 Bloodstool
Bloodstool's picture

Well said.  Finally someone who's actually read Prechter's work, speaks.

I won't waste my time countering the Prechter bashers, since facts don't matter to them.   You only have to read his books/newsletters to find the proof of his - mostly - very accurate/timely calls.  Suffice it to say, he called the 2008 decline.  He called the March 2009 run-up.  He's been right about the US$ over the past 2 years.  And, he'll be right about gold in the unfolding deflation. 

Good luck and don't get so worked up about your views.  Keep an open mind and, please, before you comment on a guy's views, have the courtesy to actually read them and understand them.

Yours truly...


Wed, 08/11/2010 - 11:34 | 515271 ATG
ATG's picture

Re "With fiat money in retreat all over the world"

Surplus Japanese Yen at 15-year highs versus dollar and surplus Chinese Renminbi Yuan up against US deficit dollar bonds.

Big4 were long yen and China; now long Corn, Wheat, the Kiwi Dollar and British Pound, while short copper, Dow, Emerging Growth, gold, NDX, silver.

Who are you going to believe/trade?

BP Government, two great old guys with decent long-term records or Big4 up 1219% ytd?



Wed, 08/11/2010 - 11:37 | 515282 Smiddywesson
Smiddywesson's picture



Prechter was one of the few who predicted deflation when everyone and his brother predicted hyperinflation.

If you read enough Prechter, you will find his acknowledgement that hyperinflation is a distinct possibility, but only after deflation has it's way with us.  He's also acknowledged that you can have inflation and deflation at the same time, inflation residing in some areas of the economy while the rest of it suffers from deflationary forces.  This would seem to undercut his argument that gold has to fall along with all other commodities, but I can think of a few better arguments.  All markets are increasingly correlated these days, and gold is a small market that is HEAVILY manipulated.  The central banks of the world are threatened by anything that can let the fish escape the net and gold is one of those things.  If you gamble in gold, you are betting that they won't try to wipe you out.  That's a big bet.  Sure, when hyperinflation hits, physical gold is great to hold, but then so is EVERYTHING else, and the central banks can't manipulate the prices of everything.  If you want to be safe from the predators, don't correlate your actions with the those of the other prey.

Prechter acknowledges that Elliott Wave is a science in its infancy.  It's not perfect, but it is pretty accurate in describing the overall trend of a market.  Unfortunately, it is predicated upon the market reflecting human sentiment, and with the degree of market manipulation going on right now, it pretty much severs that link and takes the legs out from under EWT.  Even at its best, EWT can tell you what, but it has a spotty record of telling you when.  If EWT says it's a bottom and to go long, it's pretty useful, just as it was in predicting the 3/9/2009 bottom.  However, it can give a lot of false signals in locating the tops, because prices can continue to rise long after the love is gone.


Gold was money when the available supply wasn't spread amongst 6 billion people.  It has become too valuable today to practically serve as actual money.  If you are holding gold as an end of the world hedge, you aren't going to find too many people that can give you change back from your krugerrand.  This makes them absolutely worthless for everyday use.  Find something smaller.  People will always want tobacco, alcohol, guns, ammo, fuel, and food.  If society doesn't break down, these things are still worth something.  If society breaks down, and this intricate dance of Just In Time Inventory feeding hundreds of millions in densely populated areas CAN easily break down, you are going to have to fend for yourself, and that means barter until they sort out the fiat currency mess. That would take months.  Research by Reinhart and Rogoff shows that countries that go broke eventually pay at least part of their debt back.  Everything depends on timing.  Prechter is probably right, that the USD and treasuries are the safest bet, at least for now.  The USD is not collapsing, yet.  The central banks are just playing tag with each other, taking turns as each worthless fiat currency waxes and wanes.  Stop worrying what gold EVENTUALLY has to do and take care of yourself first.  Societies DO just fall apart and everyone starts killing each other.  It has happened many times in the past.  Our doing away with the melting pot and making this a multicultural and multi class society has made the United States a tinderbox waiting to explode.  How many days of food do you have on hand?  What would you do if the ATMs stopped working for a month or two?  How would you protect what you have if the police weren't being paid to show up and protect you?  Once you have enough cash, food, protection and barter, then you can consider how to invest the rest for the long run, but that should be your last step.  It could be gold, but I think the people putting their wealth in physical gold are underestimating how long it will take to sort out this mess.  When there is no point to going to work because you aren't going to be paid, and even if you were paid the money they give you is worthless, it will be anarchy.  You won't need gold at that point, you will need food, water, and guns.



Wed, 08/11/2010 - 12:38 | 515552 augmister
augmister's picture

Bravo... don't forget the "new" precious metal, lead!

Wed, 08/11/2010 - 12:58 | 515645 BearOfNH
BearOfNH's picture

I'm pretty well set for PMs, food, water and booze but only have a little ammo for the firearms I own. Question is: what kind of ammo is worth buying for potential barter purposes? Rifle? Shotgun? Pistol? Is there any kind of recommended "ammo portfolio" for someone in a rural setting?

Wed, 08/11/2010 - 13:51 | 515823 the grateful un...
the grateful unemployed's picture

what i find amusing about the gold bugs is their consistent theme that the central bankers have been ripping them off, and this time it will be different. read einstein on insanity.

Wed, 08/11/2010 - 16:24 | 516386 zero intelligence
zero intelligence's picture

I think all these people who say "guns instead of gold" have less than $10,000 to invest. Because, you can buy a heck of a lot of food and guns for $5000. What makes you think people that own gold don't own food and guns? Besides, gold has been just fine over the last ten years, without any kind of societal breakdown. How are those guns doing?

Wed, 08/11/2010 - 11:55 | 515376 dcb
dcb's picture

the sad reality is that depending on the amount of leverage people have in their holdings nothing is safe.

Better to be short things, or dollar bull.

for instance if there are margin calls then performing assets wil be sold. if banks have treasuries on margin they will have to sell those to make up for other asset classes.

Wed, 08/11/2010 - 12:03 | 515416 Smiddywesson
Smiddywesson's picture

We live in a time when everything is interdependent.  Past failures of fiat currencies were localized, and happened in mostly agrarian societies.  When they lost their currencies, the farmers kept farming because that was their tradition.  However, that's all changed.  We have herded 360 million people off the farms into urban and suburban areas and making food is heavily dependent upon corporate farmings and transportation.  When our fiat currency fails, and they can't pay the migrant workers, it will be "So sorry Gringo" and millions and millions of acres of food will rot in the fields.  We don't run that much of a surplus that we can afford to have that happen.  When Joe six pack doesn't get paid, he will be out trying scare up some grub rather than delivering diesel to the farmers.  Same goes for the truckers, grocers, you name it.  It doesn't have to devolve into a Mad Max environment of roving biker gangs for you to starve.  All it takes is the inevitable to happen and upset the delicate balance.  The result of making things too efficient is that ANYTHING can shut down EVERYTHING.  In a world of interconnected and failing fiat currencies, don't expect ANY help from anywhere.  I do mean EVERYTHING.   

Wed, 08/11/2010 - 12:40 | 515565 augmister
augmister's picture

We are on our OWN.......  Think of the West from the 1850's to the 1880's...yeah, 30 years should do it!   Better learn how to skin an animal for meat than that MBA from Whatzamatta U!

Wed, 08/11/2010 - 13:48 | 515809 the grateful un...
the grateful unemployed's picture

is an economist an animal?

Wed, 08/11/2010 - 20:27 | 516881 StychoKiller
StychoKiller's picture

Yeah, Prognisticum ignoramus!

Wed, 08/11/2010 - 13:48 | 515813 Thunder Dome
Thunder Dome's picture

Look for insects to become a more acceptable source of protein.  And opossum, too.

Wed, 08/11/2010 - 13:23 | 515735 curbyourrisk
curbyourrisk's picture

Cash is and will remain......KING.

Wed, 08/11/2010 - 14:07 | 515865 GoinFawr
GoinFawr's picture

Au contraire:

Gold=Cash sans counterparty risk, therefore Gold is/has-been-historically/will-likely-always be King

Wed, 08/11/2010 - 13:38 | 515783 prkr01
prkr01's picture

There is a new currency called the WOCO that was recently introduced.It is comprised of the top 20 currencys and is weighted as a percentage of each countrys GDP.Sounds very interesting to me.Will it ever gain traction? Who knows but I threw a couple soon to be worthless sheckles into the publicly traded company that has been funding them.Lottery ticket.

Wed, 08/11/2010 - 13:50 | 515815 Tripps
Tripps's picture

and gold is down today...thus confirming richard russell is a moron

Wed, 08/11/2010 - 13:53 | 515830 the grateful un...
the grateful unemployed's picture

BP just issued a Special Interim Report, if any subscribers out there want to share the gneral gist of it, without violating copyright or anything of course. i suspect it is a bear market crash alert.

Wed, 08/11/2010 - 14:00 | 515847 Brutlstrudl
Brutlstrudl's picture

As usual, The comments section provide the nuance to the article. Hold gold, be ready to dump cash, Check your on line account daily, keep   tobacco, bullets and whiskey for barter, gas tanks topped off, and live as normally  as possible  and with some luck, you'll probably be OK

Mon, 08/16/2010 - 15:24 | 524488 Geoff-UK
Geoff-UK's picture

I wouldn't say "you'll probably be ok"...but at least you have a better chance than the guy who owns an X-Box, PS3, AND a Wii.  That guy is hosed...

Wed, 08/11/2010 - 20:23 | 516872 vainamoinen
vainamoinen's picture

grateful un:

Interim Report synopsis:

"Since the Dow and the dollar have reached wave 2 extremes simultaneously it is  - - - likely - - - they are turning together now".


Nothing too esoteric here - just the technical take to sunstantiate the call.

EW has been tracking the dollar quite accurately in recent months. I am buying UUP here.





Sun, 08/22/2010 - 23:10 | 536822 mrmarina
mrmarina's picture

I don't know if Prechter will be right on gold or not, but am amazed at the negative feedback from those who obviously want to discredit him because he is not a raging bull. Anyone who has truly followed Prechter over the past 25 years has to respect his thought process, and he is one of the few guru's I would consider a genius. He has made his share of bad calls... who hasn't, but I can't think if anyone who has made as many precise major market calls over the years as he has.

As hard as it is for me to align myself with the gold bug crowd, I am not completely comfortable with Prechter's outlook for gold. However, I haven't forgotten how gold collapsed and the dollar soared following the Lehman crisis. Prechter is one of the few analyst that has floated the concept how an imploding debt market and devaluation of assets will reduce the supply of dollars by many $Trillions. If that scenario does unfold, I can see where the dollar would soar and gold could plunge.  

Like many market theories, it is often those that are not intuitive which tend to be proven correct. Any armchair observer can make a logical bullish case for gold, and is there anyone left who hasn't heard all the reasons they must own gold.  It takes a deep thinker to understand the potential bearish scenario that could play out before any real bull market begins.

I wonder how many brilliant gold bugs predicted that U.S. Treasury Bonds would be outperforming gold by 20% this year??? Hmmm... 

I am neither bearish nor bullish on gold as the market appears to be relatively balanced at the moment. I see it as a short term trading vehicle. If and when gold break's out on high volume I will join the herd, but am not holding my breath.


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