Sunday, May 23, 2010

Richard Russell Says Sell Everything

Two weeks ago I posted about the great stock market debate. Should you sell the rallies or buy the dips? Link here.

I quoted two of the investment world's two most pessimistic prognosticators, David Rosenberg of the Toronto based firm, Gluskin Sheff, and Richard Russell, of the Dow Theory Letters. As I mentioned you can receive Rosenberg's eletters by signing up. Russell's service is strictly by subscription. Link here.

Since that post Russell has turned darkly bearish. He feels that the stock market has begun the second leg of the secular bear market that started in 2007-8. And he believes that the consequences for America will be dire. Link here. As the Barrister posts at Maggie's Farm: Yikes. Link here.

Truth be told, however, Russell did not say to sell everything. He said to buy gold.

Russell's views have now been widely reported. Aside from the linked article, they also made Barrons this week.
As it happens, when it comes to identifying long term shifts in the market Russell has an excellent track record.

Keep in mind that when one person's views become widely known they influence sentiment. And contrary sentiment causes the market to move in the opposite direction.

Meaning: if too many people take Russell seriously and become pessimistic, this will contribute to negative sentiment and will drive the market higher, in the short to intermediate term. If too many people decide that Russell is just an old crank, then... watch out below!

If I had to bet the ranch I would say that Russell is more likely to be right than wrong, but that this does not mean that his outlook will come to pass tomorrow morning. But if the market is headed down to the March 2009 low, around 6540, or even lower, then selling today is not such a bad idea.

1 comment:

Anonymous said...


They are going to get killed in this too, dumbasses....

When there is less economic activity and "stagflation", gold goes down too.

It's only a psychological hedge against collapse:

On The Day After the Market Collapse, McDonalds will open, they will serve Coke products and they will not be taking bits of gold for burgers!

I'm not even considering retiring for about 40 years. I am buying all the way down with my 401k.