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Manipulation! I don't give a damn

Richard Russell snippet
Dow Theory Letters
April 6, 2005

Extracted from the April 5th, 2005 edition of Richard's Remarks

Manipulation -- Every day I receive a few e-mails or a few faxes from subscribers, all accusing some one or some group of manipulating the markets. Stocks are being manipulated, gold is being manipulated, silver is being manipulated, bonds are being manipulated, government statistics (particularly inflation and employment numbers) are being manipulated.

My answer -- I don't give a damn. Everything in the world can't be manipulated. I look at almost everything in the markets, and it's my job to try to put the whole puzzle together. No item or group can be manipulated year after year (although some say the precious metals are), but in the end I trust the great primary trend of the markets. For instance, you can manipulate the stock market or a sector for a few days or even a few weeks, but in due time the "true" trend will dominate.

Ah, it's that "in due time" that drives people crazy. For instance, I believe the great primary trend of the stock market and the US economy is bearish. But c'mon, the stock market topped out in the year 2000 -- now five years have gone by, and the markets are still overpriced. Dow Theory believers are convinced that this bear market will end in a classic bottom, a bottom in which good stocks are on the "bargain table." But it's sure taking time, a heck of a lot of time.

Talk about manipulation, what do you think the Fed's been doing? The Fed's job is to manipulate. And it's all legal. I stated when this bear market began that the Fed would fight the bear "tooth and nail." Frankly, I didn't think the Greenspan Fed would go this far and for this long, but they did, and as a result, we've got the darnedest collection of bubbles ever seen on this green earth.

Bubbles? Yeah, we've got lots of bubbles -- bubbles in stocks, bubbles in bonds, bubbles in commodities, bubbles in real estate and housing, and bubbles in debt. Of course, we've also got a global bubble in liquidity. The fact is that the whole world is floating on a giant bubble of paper currencies.

One of the great liquidity-makers, aside from the Fed, is China. China has been creating billions of renminbi with which to buy dollars -- and that in turn keeps the renminbi/dollar peg in place. Of course, Japan too has been churning out huge oceans of yen with which to buy dollars. You see everyone wants to sell their merchandise and services to the US, and to do that you prefer a currency edge, meaning that you want your products to be extremely competitive. Cheap yen or renminbi or euros will help your exports -- a lot.

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