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Richard Russell continues:
“I received the Dow Theory bear market signal in early May. And I confess that I was a little nervous about calling it a bona fide bear market signal. You can be bullish and wrong and your subscribers will forgive you. But if you're bearish and wrong -- they consider it worse.
To be bullish and wrong means that your subscribers are holding stocks in a bear market, and to me, that's the worst market sin of all. It's OK to miss a rally, but it's not OK to take a big loss. So I stuck with my bear call. I told subscribers that the market does not have to fall apart immediately following a bear signal, and this market rallied following the bear signal.
So we'll see what lies ahead. After yesterday's action, I would think that Bernanke would be gassing up the helicopters. Bernanke just needs a tiny excuse to give us QE3. So load 'em up, Bennie! The most bearish action would be the Fed triggering QE3 and the market failing to rally.
Could the May bear signal have even more significance than I imagined at the time? Was it a signal for a global contraction or depression? What happens if Greece (‘Grexit’) exits the euro zone? Nobody knows, but what pessimists are worried about is that it might set off a contagion with Portugal also leaving. And then there's little Ireland and much bigger Italy. What about shaky Spain? The word is that ‘Spain is too big to fail, and Spain is too big to bail.’
Bond market skepticism -- When people are prepared to actually pay the German government for the privilege of holding two-year paper and are willing to lend the US government their money for a decade for a yield of less than 1.5%, they either expect years of virtual stagnation and deflation or are terrified of a coming disaster. Either way, something is very wrong with the world's economy.
That something is faltering growth along with the rising risk of a financial catastrophe. Economies are weakening everywhere. Three consecutive months of sinking job figures in America indicate that the US may be in trouble. Even China's slowdown is intensifying. A global recovery that falters so soon after the previous recession points towards widespread Japan-style stagnation.
So is all this what the Dow Theory bear signal was telling us? Is it something bigger and more ominous than a mere stock market decline in America? I'll admit that I've never experienced anything like this. But I'm a learner, and I'm still learning. My intuition tells me to respect the Dow Theory bear signal. Time for me to sit and await the outcome of the current perplexing melange of world troubles.
I watched a movie about Zuckerberg on Bloomberg, and my conclusion is that the Zuck double-crossed a lot of ‘friends.’ I don't think he's a sweet guy. The word is that Facebook is too intrusive. Many people who value their privacy are leaving the Zuck. People are afraid that the Zuck could be a potential J. Edgar Hoover. Personally I wouldn't trust Zuck to give me change for a dollar.
August gold was the winner today -- up 17 and above 1600 with resistance at 1635. Gold is slowly becoming more accepted and more popular -- and easier to buy and hold.”
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© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
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Eric King
Richard Russell - Financial Knockout, Gold & Zuckerberg
With continued volatility in global markets, the Godfather of newsletter writers, Richard Russell, cautioned that “The most bearish action would be the Fed triggering QE3 and the market failing to rally.” Russell also warned of a “rising risk of a financial catastrophe.” Here is what Russell had to say: “That bear market signal in early May -- did it work or was something else going on? From its April low, the Dow has rallied back strongly, and I've been wondering, ‘Is something else going on, something more ominous than simply a bear signal for the economy and stocks in the United States?’”
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast,
rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
June 13, 2012
