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There have been some notes going around that Richard Russell is now a raging bull on the equity markets after largely missing the run-up from the March 2009 lows.  This is only partially true (via The Dow Theory Letters):

“Now understand this. When extreme currency devaluation occurs, stocks (the bluest of dividend-paying blue chips) can become inflation hedges. And that’s exactly what I think we’ve been seeing in the stock market as the Dow pushes higher.

Because of the micro-dividend yield and because of divergence and because of non-confirmations, I’ve stayed out of the stock market. Obviously, in retrospect, that was a mistake. The stock market got whacked today because of a flagrant Dow Theory non-confirmation.

But I’m changing my position on the stock market. I’m now recommending buying the Dow in the form of the diamonds (DIA). I believe the Dow (but not all stocks) is being seen as a hedge against the dollar and as a safe-haven for those who perceive that the dollar as steadily losing purchasing power.

In the very big picture, I believe Americans are facing one huge and daunting problem — the steady loss of their purchasing power via a declining dollar. What we’ve been seeing is the Dow rising as it adjusts to the diminishing purchasing power of the dollar. To put it simply, the Dow alone (but not most stocks) has been acting like a currency hedge.

Consequently, I now advise my subscribers to take a very limited position in the Dow (DIA) but not in broad market ETFs or mutual funds.” (emphasis added)

Source: Dow Theory Letters

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