Richard Russell 01 (May 08 - Dec 14)

[winston]

RUSSELL: THIS IS ONE OF THE LARGEST TOPS IN STOCK MARKET HISTORY
23 June 2010 by TPC

Richard Russell has grown very vocally bearish in recent months. Earlier this year, Russell warned that the stock market was once again becoming grossly overvalued despite its relentless new highs. He has maintained that the bear market never ended and that the world is far too indebted to exit the bear market.

He also believes the bear will not end until all fiat currencies have failed. Although I disagree with him on many aspects of the micro I agree with his larger macro outlook. This bear market is not over. The secular bear market lives on. Mr. Russell thinks we might be on the verge of a terrible collapse:

“We’re now in the process of building one of the largest tops in stock market history. The result, I think, will be the most disastrous bear market since the ‘30s, and maybe worse.

Question: “What could possibly be behind such a bear market?” you ask. “The stock market is stirring up optimism on a weekly, if not daily basis, by not falling apart.”

Answer: This is the “rest” or “dead zone” I was talking about. Bear markets don’t conclude in a day, a week or a month. Months will go by, often adding to the bulls’ optimism.

I think the key element behind this great bear market will be the complete destruction of all fiat currencies. This has been a long time coming. Fiat currencies are “wealth” created by man. They are created without sacrifice, without labor, without risk, and without sweat. Basically they are an immoral device, created by secretive bankers.

If you watch the figures carefully, you’ll note the subtle deterioration. For instance, the advance-decline ratio, although up slightly for the week, had a relatively weak performance with the Dow up several hundred points over the course of the week.

And we broke the trendline in May (see the chart below showing the cumulative advance-decline line for NYSE Common Stock only, which is what we publish in our figures (courtesy of DecisionPoint — www.decisionpoint.com). The vertical lines are Jan 2008, Jan 2009 and Jan 2010 as you move to the right on the chart.

russ1 RUSSELL: THIS IS ONE OF THE LARGEST TOPS IN STOCK MARKET HISTORY

My old friend, Bob Prechter, is talking about Dow 400. I used to think this was an absurd joke. I no longer think it’s a joke. The ultimate result will be a primary bear market shocking in duration and extent.

Gold: As for gold, its stellar performance goes on. This in the face of ominous warnings of various worried experts. On Friday, August gold rose to a new record high. The next step will be into the 1300s — point&figure upside objective is now 1310.

russ2 RUSSELL: THIS IS ONE OF THE LARGEST TOPS IN STOCK MARKET HISTORY

Gold shares are lagging bullion in this last move, not yet showing the break-out seen in the yellow metal.

russ3 RUSSELL: THIS IS ONE OF THE LARGEST TOPS IN STOCK MARKET HISTORY

The world (minus the US) is loading up with the yellow metal with banks running out of vault space. The great 10-year primary bull market is moving into its 11th year. The bull market in gold attests to the systematic decline in the value of the dollar compared with real money – gold.

One of the greatest modern traders, John Paulson, who made billions on the housing collapse, has, I understand, all his personal money in gold-related items. Many of my subscribers have now built gold profits beyond anything they have ever achieved before. I know at this point one could get itchy fingers thinking of the profits achievable by switching gold for fiat currency. I warn subscribers, stay on the yellow brick road. The big profits, the astounding profits, will accrue when gold finally bursts loose of its prejudices and freely expresses itself.

My advice now is to put as much of your money as you’re comfortable with in bullion coins. Remember the simple phrase that’s been around through years of history – “There’s no fever like gold fever.” Fiat money is doomed. Act on it.”

Source: Dow Theory Letters

http://pragcap.com/russell-this-is-one- ... et-history

[winston]

Richard Russell: A market disaster is approaching
From Richard Russell in Dow Theory Letters:

The bear keeps torturing the majority. If only the authorities could straighten out the oil problem, the housing problem and the unemployment problem, everything would be fine.

But the market is not interested in current problems, it is looking ahead to the disaster that we will see in late 2010...

Holding stocks here is a sure ticket to a smaller bank account. People cannot take it into their psyches that this is the resumption of one of [history's] great bear markets. Our salvation is bullion gold. The gold mining stocks are also doing beautifully.

[winston]

Now I understand why they say that the older you get, the more you tend to mumble the same thing over and over again. Wonder why people are paying for a broken record ?

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Richard Russell: Everything you need to know about gold in three sentences
From Richard Russell in Dow Theory Letters:

...As I've said a thousand times, Fed Chief Bernanke will absolutely not accept deflation...

Shrewd gold-accumulators are well aware of [this]. As the deflationary and deleveraging forces press on the US economy, the Bernanke Fed is ready to devalue the US dollar in its ("whatever it takes") battle to hold back deflation.

Let's boil the whole thing down to three sentences.

(1)The Fed will not tolerate the growing forces of deflation.
(2) To combat the deflationary forces, the Fed will devalue the dollar by printing trillions more of Federal fiat money.
(3) Once it is realized that the Fed is on the path to devalue the dollar, there will be a panic to buy and own gold.

[winston]

Richard Russell: The market says real deflation is coming
From Richard Russell in Dow Theory Letters:

... [Say] hello to deflation. The signs of "too-low inflation" (Fed speak for deflation) are flashing everywhere, and the bond market is adjusting to discount deflation. This from Bloomberg – Treasury Two-Year Note Yields Tumble to a Record Low as Economy Weakens...

Russell Comment – We're moving very close to actual deflation – the bond market is saying it. At this point the Fed is very nervous. Therefore, I expect the Fed to start big time printing ("quantitative easing") very shortly.

This is what's holding gold above 1000, and, so far, above 1100. The Bernanke Fed has a well-advertised formula for defeating deflation. The formula consists of printing more money, which is obviously inflationary.

The massive creation of more money dilutes the purchasing power of the dollar. Frankly, the deflationary forces are hitting much faster than I thought they would. This must be what the stock market has been telling us. The stock market deflates first (as it has been doing), and the economy follows.

[winston]

Richard Russell: “A hard rain lies ahead”

“I want to say that I have a number of reasons for being convinced we have been in an upward correction [referring to the rally that commenced in March 2009] in an ongoing primary bear market.

Some of this is based on my interpretation of the 50% Principle, plus my analysis of the very poor action of the “internal market” [i.e. market breadth] over recent weeks.

“I envision the Dow dropping to test, and possibly violate, the 6,547 level. I don’t know whether this will take place this year, but I wouldn’t be shocked if it does. It would not surprise me if the Dow tests the 6,547 level. And if that happens, I can almost guarantee the US will have sunk into the much-feared “double-dip” recession.

“If the US begins to shrink into a double-dip recession, I expect the Obama administration to go ‘wild’ with new stimuli and ‘make-work’ programs, all of which will be financed with higher taxes (‘soak the rich’) and a further major expansion of the Federal Reserve balance sheet. I would also expect every central bank in the world to simultaneously open their money-printing spigots wide, wide, wide.

“Conclusion in a nutshell: the secret of the forthcoming picture lies with the action of the U.S. stock market. Again I’ll remind my subscribers that the function of the stock market is to discount the future, not to mirror the present. All news is history. Or as Wall Street puts it, “news known is news discounted”.

“One of the biggest mistakes amateurs make is to think something they know is unknown and not already discounted by the market. Despite this, the media insist on describing every move of the stock market as being a reaction to some current event or some new government statistic.

They couldn’t be further off the mark. As I read it, the poor action of the current stock market is telling us that the future for the U.S. is bearish and a hard rain lies ahead.

“At this juncture, sophisticated, wealthy people are not concerned with increasing their fortunes, rather they are searching for ways to conserve what wealth they have.”

Source: Dow Theory Letters, July 19, 2010.

[winston]

Richard Russell: Inflation will dominate deflation
From Richard Russell in Dow Theory Letters:

The too-low inflation numbers (call it what it is -- multiple indications of deflation) are appearing. The Bernanke Fed crowd must be sitting on the edge of their seats with accompanying white knuckles.

As the hints of deflation break out into the open, I expect the Administration to freak out and come up with new stimulus and make-work plans, and I would expect the Fed's balance sheet to expand - meaning to look worse.

All this is not lost on gold, which has been holding up rather well -- this, despite the slowly-strengthening dollar.

Do you remember Bernanke's words, "You cannot have deflation in a fiat currency system." Why not? Because the Fed can create so much money that inflation will dominate deflation.

[trendlines]

Thanks winston for sharing these. Enormous respect for Richard Russell, done so much over the years.

[winston]

Richard Russell: What dividends are saying about stocks today
From Richard Russell in Dow Theory Letters:

One key to how corporations are really doing is whether they raise or cut dividend payouts. A company is very careful about raising its dividend. They want to be certain that they can hold that boost over the years.

By the same token, companies are reluctant to reduce dividends. Reducing a dividend suggests that the company is running low on profits or running low on cash. Lowering a dividend is a black mark against a company.

During the second quarter, 335 of the 7,000 corporations that S&P monitors raised their dividends, while only 34 cut their dividends. This is far below pre-recession 2007, when 542 companies raised their dividends and only 18 cut their dividends. The trend of dividends provides a valid look into the health or weakness of corporations.

Earnings can be anything an accountant says they are, but dividends don't lie. That's why at the bottom of bear markets dividend yields constitute a vital factor, and this applies to dividend yields at bull market tops. For instance, the dividend yield for the S&P 500 is now a minuscule and sub-standard 2.11%.
Below 3.5% used to be considered the danger level.

[-dol-]

Now I understand why they say that the older you get, the more you tend to mumble the same thing over and over again. Wonder why people are paying for a broken record ?

A certain voice in an uncertain world will get a certain following.

“At this juncture, sophisticated, wealthy people are not concerned with increasing their fortunes, rather they are searching for ways to conserve what wealth they have.”

Source: Dow Theory Letters, July 19, 2010.

What about the "unsophisticated, wealthy", the "sophisticated, unwealthy" and the "unsophisticated, unwealthy"?

[winston]

Richard Russell: Stock market rally will continue
From Richard Russell in Dow Theory Letters:

Question – Russell, how can you be bearish and in a few weeks change your mind?

Answer – I base my opinions on the action of the stock market. When the stock market changes its position, I change mine. To do anything else would be a nasty disservice to my subscribers. When the facts change, I change. That's a major part of my job, and why I've been able to stay in business since 1958.

... The Industrials and Transports closed cleanly and decisively above their June highs, telling us that the advance from the June lows will be extended...