Monday, January 21, 2008

Long Live Richard Russell

A short note to recognize the able reporting by RR on the Dow Theory. He called a bear market in October based on the Dow Industrials and Transports both hitting new lows. This is the first time since the 1999 bear call that he has called another bear. He has been touting gold and utilities with a side bet on oil for years. All of those bets have paid dividends, literally, for years.

As of this morning in Brisbane, the majority of developed markets are on their way to their 200 week moving average (US, Aus, Asia), on it (FTSE) or have broken it (Tokyo). Most of the emerging markets are still a long way away (Brazil, Dax, India, Shanghai, Kospi...). Gold, metals and oil are all getting whacked. The Dow futures point to a 5%+ down open.

As quoted from Bloomberg, "The MSCI World Index's 3 percent decline yesterday, the steepest since 2002, left benchmarks in France, Mexico, Italy and 35 other countries at least 20 percent below their highs in the last year. The Standard & Poor's 500 Index may post its biggest decline since 2001 when the U.S. market resumes trading today after the Martin Luther King Day holiday, futures showed... Among 80 equity national equity benchmarks tracked by Bloomberg, indexes in Argentina, Australia, Austria, Belgium, Bulgaria, Chile, Colombia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Hong Kong, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Mexico, Namibia, the Netherlands, Norway, Peru, Poland, Portugal, Romania, Singapore, Spain, Sweden, Switzerland, Sri Lanka, Turkey, Venezuela and Vietnam also have dropped at least 20 percent from recent highs."

The glorified pundits (Soros, Roubini) have been warning that the US is entering a protracted financial crisis period, with a resulting recession, hobbled banking system, a broken housing market, indebted consumers and an even more indebted government. With over $1 trillion spent on the wars, and a dire need for infrastructure spending, the US appears to be facing a long, drawn out recovery - maybe reminiscent of the 70's stagflation.

I have no idea what's going to happen, but this week does look like panic, and I am prone to look for bounce candidates. A list will follow shortly.


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