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Few investors have been more vocal about the potential collapse of the US Dollar than Richard Russell.  But as the recovery builds strength Russell has dramatically toned down his commentary about any potential hyperinflation and collapse of the USD.  In his Friday commentary he said the market action simply isn’t even remotely displaying a hyperinflationary environment or even an eventual hyperinflationary environment.  And he’s dead right (via Dow Theory Letters):

Comment — I read a lot about “the coming hyper-inflation.” If hyper-inflation is in our future, I don’t see it in the market action.

The precious metals are hesitating, the CRB Commodity Index is in a bullish trend but is now hesitating, XLE, the widely-followed energy exchange traded fund has been in a bullish trend but is now moving sideways, oil has been declining, and March oil is now selling below 86.

And what’s most important (nobody seems to be noticing this) is that Chinese stocks are most definitely in a down-trend. China has been the monster buyer of commodities, and if China is slowing down, that will put a big question market in the hyper-inflation scenario.

One other item — if we’re heading for hyper-inflation Treasury bonds should be falling out of bed. Not so, below is a daily chart of the 30-year US Treasury bond, and it’s hardly falling out of bed. If there’s inflation coming and certainly hyper-inflation, the bond market will smell it. From the looks of this chart, I’d have to bet deflation over inflation.

When ever I hear a consensus view of what lies ahead, I always check with the market. If the market doesn’t agree, I remain sceptical. As for the current hyper-inflation forecast, I’ll remain sceptical as long as the market is sceptical.

Source: Dow Theory Letters

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