Experience: 89 Year Old Legend Goes Bearish

Posted by Richard Russell - Dow Theory Letters

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Hey, I don’t like what I see on the Lowry’s statistics. Buying Power (demands) has been slipping, and Selling Pressure (supply) has been creeping higher. The negative spread between the two has widened from a recent 130 to yesterday’s 145. In the meantime my PTI, after forming a double top, has failed to go to a new high. Yesterday my PTI was 5 bullish by a mere 5 points. 

Verdict — be OUT of all stocks and be very patient. I don’t like the undertone of this market one bit; I think the stock market is under subtle and quiet distribution. Holding any stocks over time will be a loser — so it’s simple — don’t hold them; stay in cash and gold coins until I think of something better. I also like the Permanent Portfolio PRPFX, which is a reasonable place to park your assets. 

The market has been quiet for a while. I think something big is coming up, and I don’t think it will be good. Caution is the watchword now. This is the quiet before the storm. I note that the VIX (the “fear index”) has been quietly and slowly rising to where it is 19.55 today. The chart below of the VIX shows the VIX climbing above its 50-day moving average. MACD is giving a “buy” signal.

Yesterday I went to Costco for the first time — to buy a pair of eye glasses. The place is amazing. It’s built like an aircraft hanger or dome, severe, lots of room, high ceilings, no frills at all. At each long aisle there was some one handing out free food samples. I ended up eating a full free dinner, and it was good at that. I bought three pairs of eye glasses with frames for $375, about one third of what it would cost me at a La Jolla oculist.

Costco had just about every thing you can think of for modern living — at bargain prices — vacation trips, vacuum cleaners, pots and pans, deck furniture, awnings, flowers. I wondered whether this is the real trend of the future. Membership to Costco is fifty bucks a year for two people. Why would a person shop any place else? The only problem is quantity. Everything for sale from razor blades to Ensure to T-shirts to frozen burgers comes in quantities — you can’t get out of the place for less than three hundred bucks. Take a trip to Costco and you’ll get an idea of how much sheer “stuff” is being manufactured in the world today. Who the hell is going to use it all? Hopefully 1.3 billion Chinese will use it.

Gold continues to be a maddening mystery. Yesterday, to the consternation of gold shorts, Dec. gold closed below 1600 (it did it again today). I’m increasingly convinced that the only safe way to own gold is in bullion coin form. In that way, you’ve got your gold and you’re not tempted to trade it. You hold onto it, and you take it to your grave — or give it to your kids or your sweetie. 

In that way, you own a position in gold (the size of which is up to you) and you forget about it. It’s like a house that you like and that you own free and clear. You don’t call your real estate agent every week to ask what your house is worth. You bought it, you like it, it’s a source of pleasure, and you don’t stay awake nights worrying about it.

Lately, I hear a lot of gold-naysayers boasting that “I own gold for insurance purposes only, although I’m certainly NOT a gold-bug.” Of course, the same people feel happy as a lark when their gold goes up in price. 

I have subscribers who loaded up on bullion ten and even 25 years ago. They write to tell me that those purchases have changed their lives, although they never would have believed it when they were buying their gold at rock-bottom prices.

“Buy your gold and look away. Your buys will look brilliant some other day.”


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Russell began publishing Dow Theory Letters in 1958, and he has been writing the Letters ever since (never once having skipped a Letter). Dow Theory Letters is the oldest service continuously written by one person in the business.

Russell gained wide recognition via a series of over 30 Dow Theory and technical articles that he wrote for Barron’s during the late-’50s through the ’90s. Through Barron’s and via word of mouth, he gained a wide following. Russell was the first (in 1960) to recommend gold stocks. He called the top of the 1949-’66 bull market. And almost to the day he called the bottom of the great 1972-’74 bear market, and the beginning of the great bull market which started in December 1974.

The Letters, published every three weeks, cover the US stock market, foreign markets, bonds, precious metals, commodities, economics –plus Russell’s widely-followed comments and observations and stock market philosophy.

In 1989 Russell took over Julian Snyder’s well-known advisory service, “International Moneyline”, a service which Mr. Synder ran from Switzerland. Then, in 1998 Russell took over the Zweig Forecast from famed market analyst, Martin Zweig. Russell has written articles and been quoted in such publications as Bloomberg magazine, Barron’s, Time, Newsweek, Money Magazine, the Wall Street Journal, the New York Times, Reuters, and others. Subscribers to Dow Theory Letters number over 12,000, hailing from all 50 states and dozens of overseas counties.

A native New Yorker (born in 1924) Russell has lived through depressions and booms, through good times and bad, through war and peace. He was educated at Rutgers and received his BA at NYU. Russell flew as a combat bombardier on B-25 Mitchell Bombers with the 12th Air Force during World War II.

One of the favorite features of the Letter is Russell’s daily Primary Trend Index (PTI), which is a proprietary index which has been included in the Letters since 1971. The PTI has been an amazingly accurate and useful guide to the trend of the market, and it often actually differs with Russell’s opinions. But Russell always defers to his PTI. Says Russell, “The PTI is a lot smarter than I am. It’s a great ego-deflator, as far as I’m concerned, and I’ve learned never to fight it.”

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Investors Intelligence is the organization that monitors almost ALL market letters and then releases their widely-followed “percentage of bullish or bearish advisory services.” This is what Investors Intelligence says about Richard Russell’s Dow Theory Letters: “Richard Russell is by far the most interesting writer of all the services we get.” Feb. 19, 1999.

Below are two of the most widely read articles published by Dow Theory Letters over the past 40 years. Request for these pieces have been received from dozens of organizations. Click on the titles to read the articles.

Rich Man, Poor Man (The Power of Compounding)

The Perfect Business