With continued chaos around the world and uncertainty in global markets, today KWN is publishing an incredibly powerful piece that was written by a 60-year market veteran.  The Godfather of newsletter writers, Richard Russell, discusses what he calls “one of the greatest economic scandals in US history.”

Russell: “Volatility as expressed by the VIX has been low for many months.  The last time the VIX rose above 20 was last October.  I get the feeling that this may be the calm before the storm.  The latest VIX reading is 13.6 and between now and February I expect to see the VIX move up to around 20 or more.

The first week in January gave us no hint as to what’s coming up.  Every week that goes by increases the odds for a surge in volatility.  If volatility does surge, I don’t know if it will result in the market moving up sharply or down sharply.  From my own standpoint, I prefer peace of mind and watchful waiting as we prepare for stock market history.

Meanwhile, optimism remains very high. Investor’s Intelligence lists bullish advisories at 61.6% — a five year high, with bearish investors at 15.2%.  At the same time there are 6 distribution days on both the S&P and the NASDAQ.  With the Industrials and Transports both at recent record highs, the Averages continue to point higher.  But caution is still warranted.

Meanwhile, gold creeps quietly higher.   If gold hits the 1270 box, it will be a victory for the bulls.  Gold tested the low at the 1190 box, then rallied to 1237.  Gold must now hit 1270.

Emmett Fox asks the question, “If you have to choose one, which would you take: a million dollars or peace of mind?”  He states that if you picked the money, you’d be wrong.  Nothing is more valuable than peace of mind.  This has a lot to do with my present view of investing.  No amount of money can provide you with peace of mind.  Today we have more potential problems in the economy than I’ve ever seen before.  And I imagine, for the average person who wants to give his family three meals a day and a roof over their heads, this bring up the question of peace of mind.

The current course that I have picked in investing is to watch the show.  To some extent this has given me peace of mind.  Yesterday’s issue of USA Today lists five risks to the current bull market.  This is an interesting list but I can think of a lot more than five that could possibly upset this bull market.  In my life I have been a champion worrier, and thus I know the value of peace of mind.  The reason I like gold is that it affords protection against the ignorance of mankind.

In the history of mankind, only gold has been considered pure wealth.  It is wealth standing on its own, minus the weakness and stupidity of mankind.  From the standpoint of peace of mind, I have decided to watch the show along with my largest position – bullion gold – and that’s where I stand at this time.  I don’t care where gold goes in terms of dollars.  But I do care where the dollar goes in terms of gold.

From an economic standpoint, with America’s debts as massive as they are, I don’t see how any equity investment can provide peace of mind.  Our national debt is now above $17 trillion.  I don’t see how this debt will be resolved, while at the same time allowing us the gift of peace of mind.

I offered the thought that the US could unilaterally re-set the price of gold to a much higher number and overnight re-liquify the system and minimize the pressure of our enormous debt.  The price of gold has been re-set twice before by the US, so why not now?  Yet nobody in DC has even broached this idea.  Why?

Then the full horror of the situation struck me.  The reason raising the price of gold isn’t discussed is that we probably haven’t got the gold.  Like Britain, we may have sold much of our gold or loaned it out to bullion banks!  There have been rumors of the US having “lost” much of its gold.  Then why the hell doesn’t the Treasury have an audit on our gold holdings and end the rumors?  What is the Treasury hiding?  We need an audit to prove that the US has the gold.

If it’s true that the US has gotten rid of a large portion of its gold, this could turn out to be one of the greatest economic scandals in US history.  Technically, gold is part of the Treasury holdings and is owned by the citizens of the United States.  It’s our gold, show it to us.  There is something funny about why they won’t proceed with an audit.  Something strange is going on.

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