Richard Russell: “Gold Is Again In A Bull Market”

The choices ahead are — the Fed will continue QE, or at some juncture ahead, all the smart boys will all rush for the exits at the same time. How this will all work out is a mystery to me. I’m just as happy to be out of common stocks and in the precious metals. (Richard Russell, King World News)

Since 2001, that I’m aware of, Richard Russell has been slowly and steadily increasing his recommended exposure to physical gold and silver.  Apparently, he’s now 100% in metals and completely out of the stock market except, I assume, some exposure to mining shares.

Chart of gold below. As I write an hour before the close, gold is up $41. Referring to the chart you can see this puts gold above its 50-day and 200-day moving averages. This should start squeezing the gold shorts. The bear market in gold is over, and gold again is in a bull market.

The stock market is now excessively overheating, especially in comparison to the underlying fundamentals. Even companies with reported net income growth are showing flat to down revenues.  Aside from the Fed intervention, stock prices are being fueled by corporate share buybacks.  In Q1, S&P 500 companies spent 93% of their net income on share buybacks and dividends.   Corporate insiders are dumping their shares in record amounts into their own companies’ buybacks – especially the homebuilders.

It’s time to get out of most stock and bond sectors and into physical gold/silver (NOT GLD or SLV) and junior mining shares.  As this bull market in gold advances, there will be a flurry of M&A activity at much higher price levels.

I have what I consider three superb risk/return junior mining plays in my research section:  LINK.  I’m currently getting ready to write up what I think is one of the best risk/return plays in the junior mining sector that I’ve seen in over 13 years of my involvement in this sector.

9 thoughts on “Richard Russell: “Gold Is Again In A Bull Market”

  1. Dave,

    First outstanding call on OSK.ff. I was an early investor via queenston mining and have owned OSK for many years.

    So what can you tell us about their new gold royalty company which is the spin off from that AEM / AUY buyout

    Any thoughts? Sounds good on face value

    Keep up the good work!

    1. I actually have not looked at the new royalty company – but it’s now on my list. I’ve got a play that will be a home run. Hopefully I’ll be able to get it posted in my research section by tomorrow nite – or Monday at the latest. I’ve spent time the management on 3 occassions, twice in person and on the phone for over an hour a couple days ago. This one is beaut.

      Thanks for the kudos on OSK. Unfortunately, if the deal occurred when gold was at $1900, the take out price would have been close to $15 I bet.

      1. Fortunately I got our avg cost of our position in the fund below the take-out price because I had sold a fair amount a while ago when it was still over $7-8 and reloaded a lot when it was below $5.

  2. By Wolf Richter
    You got it Dave- corporate insiders selling into the massive bubble of corporate stock buybacks, a bubble already deflating.
    Last Time Corporate America Did This, The Stock Market Crashed
    Friday, June 20, 2014 at 5:38AM

    The S&P 500 stock index bumbles to new highs no matter what. But it has been a slog: serial GDP downward revisions forward and backward, unceremonious abandonment of “escape velocity” for the fifth year in a row, wars or civil wars in Ukraine and Iraq with consequences for gas supplies to Europe and oil supplies to the world, US inflation heating up. And stocks nevertheless rise because…. The Fed Rules, Metrics and Ratios Are Just for Decoration…

    Buybacks peaked precisely at the top of the market in Q3 2007 then plunged over 80%. By Q2 2009, when stocks were cheapest, buybacks had nearly stopped. It seems like a clockwork of bad timing: buybacks soar when stocks go into bubble mode and collapse when stocks get cheap. But the relationship works the other way around.
    The purpose of buybacks is to use shareholder equity to manipulate up the stock price. It works in three ways: one, through the sheer buying pressure – especially easy during these times of super-low trading volume; two, through this form of financial engineering that boosts earnings per share by lowering the share count, though it does nothing for actual earnings; and three, through the hype surrounding the buyback announcements and even the whispers of them…

    But the tide seems to be turning, and the money seems to be ebbing. Most of the top buyers have already indicated that they’re cutting back. A couple of days ago, FedEx announced that it whittled down its buybacks from $2.8 billion in Q1 to $1 billion this quarter. When Apple raised its buyback authorization through December 2015, it worked out to be $6.3 billion per quarter – down from $18.6 billion in Q1. IBM slashed its full-year buybacks by about $2 billion per quarter for the remainder of 2014. GE disclosed that it would cut its buybacks. Exxon Mobil, AT&T, Oracle, and Wal-Mart already reduced their buybacks in Q1 from the average quarterly amounts in 2013.
    So what happens to the stock market when these huge and reckless buyers with their nearly endless resources and ability to borrow at practically no cost start cutting back after such a phenomenal peak? Well, we know what happened when they did the last time: the stock market crashed…”

    1. Yes, I will get around to doing a report on it. I’m working on one that I hope to have up tomorrow sometime that is my best idea in a long long time in this sector

  3. I hate to play devil’s advocate, especially since ol’ scratch has all the advocates he needs (i.e. everybody in congress, all of the lobbyists and lawyers, all of Wall Street, etc.) -but I have seen this all before, its like a bad re-run on the boob tube.

    Gold and silver go up, we all rejoice, the paper pumpers lay low until things start to heat up and then slam the gold & silver price on the COMEX, the price goes down and we all mourn.

    I just watch the action as a disinterested spectator. We won’t see real action until the last bar of gold is sold from the West’s vaults or some big player demands metal and not paper or money in return. Then and only then will we see gold and silver rise in price that da boyz won’t be able to slam down.

    Sorry to be so negative, but the precious metals can be like a fickle lover, one day all smiles and hugs, the next day heartache and aggravation.

  4. Main stream media opinion piece emphasizing how quickly an investment strategy can go to pieces if one’s thrilled to pieces over minutiae.
    Why Gold and Silver Are Soaring
    Ben Kramer-Miller | More Articles
    June 21, 2014
    “Gold and silver have had phenomenal weeks, with the metals rising nearly 3 percent and 6 percent, respectively. Many columnists are claiming that this is due to escalating tensions in Iraq and the rising possibility that the Iraqi state will enter a state of chaos.

    But this really isn’t the case, or it is in the same way that the assassination of the Archduke Ferdinand “caused” World War 1: It was the trigger, but in itself it was not the driving force behind the war. So perhaps there are some speculators that bought gold this week because they are concerned that political tensions in Iraq will escalate, but there are deeper factors driving the price that have been driving the price higher for many years now. Only those investors who understand this will have the confidence to buy gold when the market is weak, or when geopolitical tensions in Iraq (or anywhere for that matter) dissipate…”

Leave a Reply

Your email address will not be published. Required fields are marked *

Time limit is exhausted. Please reload CAPTCHA.