Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

[Master Shake]

WHOA!

Richard Russell, the famous writer of the Dow Theory Letters, has a chilling line in today's note:
Do your friends a favor. Tell them to "batten down the hatches" because there's a HARD RAIN coming. Tell them to get out of debt and sell anything they can sell (and don't need) in order to get liquid. Tell them that Richard Russell says that by the end of this year they won't recognize the country. They'll retort, "How the dickens does Russell know -- who told him?" Tell them the stock market told him.

That's pretty intense!

Update: By popular demand, here's more on what he sees in the market. The gist is that the markets recent gyrations are telling him that the economy is in trouble:
And I ask myself, "Am I seeing things? The April 26 high for the Dow
was 11205.03. The Dow is selling as write at 10557 down 648 points
from its April high. If business is even better than expected, then
why is the Dow down over 600 points? And why, if there were 674 new
highs on the NYSE on April 26, were there only 20 new highs on Friday,
May 14? And if my PTI was 6133 on April 26, why is it down 17 points
since its April high?

The fact is that I've been seeing deterioration in the stock market
ever since early-April, and this in the face of improving business
news. The D-J Industrial Average is composed of 30 internationally
known top-quality blue-chip stocks. These are 30 of "America's biggest
companies." If Barron's is so bullish on the future of America's
biggest companies, then why isn't the Dow advancing to new highs?

Clearly something is wrong. But what could it be? Much as I love
Barron's, I trust the stock market more. If I read the stock market
correctly, it's telling me that there is a surprise ahead. And that
surprise will be a reversal to the downside for the economy, plus a
collection of other troubles ahead.

About Dow Theory -- First, we saw the recent April highs in the
Averages. Then we saw a plunge in both Averages to their May 7 lows --
Industrials to 10380.43, Transports to 4298.12, next a short rally. If
ahead, the two Averages turn down and violate their May 7 lows, that
would be the clincher. Such action would signal the certain resumption
of the primary bear market.

Just as for years I asked, cajoled, insisted, threatened, demanded,
that my subscribers buy gold, I am now insisting, demanding, begging
my subscribers to get OUT of stocks (including C and BYD, but not
including golds) and get into cash or gold (bullion if possible). If
the two Averages violate their May 7 lows, I see a major crash as the
outcome. Pul - leeze, get out of stocks now, and I don't give a damn
whether you have paper losses or paper profits!


Read more: http://www.businessinsider.com/dow-theorist-richard-russell-sell-everything-liquid-you-wont-recognize-america-by-the-end-of-the-year-2010-5#ixzz0oJsBBeCw

What's Russell's track record? He's been around for a while, and I don't recall such alarmist statements from him before.

[chr5648]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

I have assumed for the past 2 years that the market would keep climbing simply due to the fed money in the market. My plan was just continue trading the mini dow and gold long for the next few years except for the dips and minor corrections. BUT,

About 4 weeks ago I started to see some bearish signs in my trading, I was losing on long trades off my signals. I have since been trading the indexes to the downside, once again profitable. The currencies have been extremely volatile, and what is really scary is the correlations have changed from dow-usd/chf to dow-eurjpy. The carry trade has massively changed and is scarring me. After reviewing the greece situation and its influence on the rest of the world, thinking deeply, and also going through martensens crash course again. I too think this is a critical juncture.

What I really am scarred of is the loss of trust in everything and everyone. Wherever you look, whether its the .gov, banks, business, neighbors, citizens, and elsewhere, there is a massive loss of credibility and trust. People are living a life with a common denominator of fraud and lies. This is just as much of a culture crisis as it is financial turmoil.

[FRED]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

Russell has called for deflation for some time. This is the most specific and drastic call yet, a "double down" on previous incorrect calls.

We think he's right about getting out of stocks and that there is "something wrong" but it's not a deflation risk. The gold market has it right. The reason the DOW is falling is as we explained in The Next Crash - Part I: How the First Bounce of the Debt Deflation Bear Market Ends published when the DOW was still above 11,000 is a combination of factors that Goldman Sachs predicted well over a year ago: stimulus will by Q3 2010 begin to exert a negative impact on the economy:

Chart from
Everyone is wrong, again – 1981 in Reverse Part I: The Great Divide – Eric Janszen

The drag on the economy that Goldman projected is that created when public debt crowds out private debt. We are working on a "Everyone is wrong" update to see where we are in the epiphany process.

[BigBagel]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

I have assumed for the past 2 years that the market would keep climbing simply due to the fed money in the market. My plan was just continue trading the mini dow and gold long for the next few years except for the dips and minor corrections. BUT,

About 4 weeks ago I started to see some bearish signs in my trading, I was losing on long trades off my signals. I have since been trading the indexes to the downside, once again profitable. The currencies have been extremely volatile, and what is really scary is the correlations have changed from dow-usd/chf to dow-eurjpy. The carry trade has massively changed and is scarring me. After reviewing the greece situation and its influence on the rest of the world, thinking deeply, and also going through martensens crash course again. I too think this is a critical juncture.

What I really am scarred of is the loss of trust in everything and everyone. Wherever you look, whether its the .gov, banks, business, neighbors, citizens, and elsewhere, there is a massive loss of credibility and trust. People are living a life with a common denominator of fraud and lies. This is just as much of a culture crisis as it is financial turmoil.

It's the Enronization of our culture.

[charliebrown]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

Can gold go up in a SEVERE deflationry market?

Since our money is debt, if we do get severe deflation, that money market that everyone thinks is safe is filled with debts of those who cannot pay. Same goes for the U.S. treasury. If tax receipts crater, who is going to return your principle?
The only one is the fed who can montetize the debt.


Gold has no counter party risk. A mild deflation is bad for gold. but a severe one, I think is good too.

[ThePythonicCow]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

People are living a life with a common denominator of fraud and lies.

Where W = Wealth and F = Fraud.

[chr5648]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

Where W = Wealth and F = Fraud.

Now that you've quantified human behavior, you can work on wall street and come up with some more crazy quant equations. And if you f-up royally get a nobel like the guys who came up with black scholes. ;)

[Spartacus]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

AFAIK there's been no severe deflation since fiat currencies & central banks have been in charge worldwide.

Next time it happens will be the first, so we'll get back to you after.

Can gold go up in a SEVERE deflationry market?

Since our money is debt, if we do get severe deflation, that money market that everyone thinks is safe is filled with debts of those who cannot pay. Same goes for the U.S. treasury. If tax receipts crater, who is going to return your principle?
The only one is the fed who can montetize the debt.


Gold has no counter party risk. A mild deflation is bad for gold. but a severe one, I think is good too.

[Starving Steve]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

Russell has called for deflation for some time. This is the most specific and drastic call yet, a "double down" on previous incorrect calls.

We think he's right about getting out of stocks and that there is "something wrong" but it's not a deflation risk. The gold market has it right. The reason the DOW is falling is as we explained in The Next Crash - Part I: How the First Bounce of the Debt Deflation Bear Market Ends published when the DOW was still above 11,000 is a combination of factors that Goldman Sachs predicted well over a year ago: stimulus will by Q3 2010 begin to exert a negative impact on the economy:

Chart from
Everyone is wrong, again – 1981 in Reverse Part I: The Great Divide – Eric Janszen

The drag on the economy that Goldman projected is that created when public debt crowds out private debt. We are working on a "Everyone is wrong" update to see where we are in the epiphany process.

"The stimulus exerts a negative impact upon the economy by Q3 and Q4."

With Richard Russel saying to now sell everything, the failure of Bernanke's zero interest rate policy is manifest. So, why is Bernanke still heading the FOMC? Why is Martin Feldstein still heading the economics department at Harvard? Why do we need a Fed? Why do we need the TARP? Why do we need Congress listening to Bernanke and to Nancy Pelosi--- the latter who urged Congress to pass the TARP in 2009.

The words in Greenspanese for this fiasco: "a bi-variate economic recovery". Those were Alan Greenspan's exact words this week for what we are now experiencing in America--- the middle class becoming impoverished at the same time that the bankers become super-rich.

[thriftyandboringinohio]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

Russell has called for deflation for some time. This is the most specific and drastic call yet, a "double down" on previous incorrect calls.

We think he's right about getting out of stocks and that there is "something wrong" but it's not a deflation risk....

Every expert has a field of specialty. Richard Russell is an expert in the stock market, with perhaps the longest and most impressive history of correct stock market calls published before the event. To quibble that he gets deflation/inflation wrong is to miss the point. I would never bet against Russell on a call for a major stock market reversal.

[FRED]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

Every expert has a field of specialty. Richard Russell is an expert in the stock market, with perhaps the longest and most impressive history of correct stock market calls published before the event. To quibble that he gets deflation/inflation wrong is to miss the point. I would never bet against Russell on a call for a major stock market reversal.

"Sell stocks" is okay by us. We sold in March 2000. The S&P500 has never recovered to that level in real terms, and the NASDAQ not in nominal terms, either. We gave stragglers another chance in Dec. 2007 to retain 80% of March 2000 stock value. Late April 2010 we gave in The Next Crash the straggling stragglers a chance to hang on to 60% of March 2000 S&P500 purchasing power. Now Richard Russell says "sell everything liquid." Better late than never. But then if you are an expert in stocks you have to talk about stocks, even if the market for them has been falling for a decade.

But "sell everything liquid" implies the most liquid of all investments: gold. Or is he getting Mish-like on us and saying that gold rises during deflation periods?

[Basil]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

One more day like today and we are at the May 7 low. Given Russel's record, this does give me pause. I used to read him with some frequency and have never heard this tone from him

[thriftyandboringinohio]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

"Sell stocks" is okay by us. We sold in March 2000. The S&P500 has never recovered to that level in real terms, and the NASDAQ not in nominal terms, either. We gave stragglers another chance in Dec. 2007 to retain 80% of March 2000 stock value. Late April 2010 we gave in The Next Crash the straggling stragglers a chance to hang on to 60% of March 2000 S&P500 purchasing power. Now Richard Russell says "sell everything liquid." Better late than never. But then if you are an expert in stocks you have to talk about stocks, even if the market for them has been falling for a decade.

But "sell everything liquid" implies the most liquid of all investments: gold. Or is he getting Mish-like on us and saying that gold rises during deflation periods?

With all due respect, Fred, Russell said:

"Just as for years I asked, cajoled, insisted, threatened, demanded,
that my subscribers buy gold, I am now insisting, demanding, begging
my subscribers to get OUT of stocks (including C and BYD, but not
including golds) and get into cash or gold (bullion if possible)."

I threw in with EJ years ago, but Russell is also generally correct within his field.

[Blackhawk]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

Russell said to get out of stocks, but not gold stocks. When the market tanked in 08, gold stocks took a bath and led the market down. He must think that the drop will be so bad that gold stocks will decouple from the rest of the stock market... That seems like a pretty drastic prediction.

[Raz]

Re: Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

Here are two recent "snippets" from Russell
He's been bullish on Gold for at least several years.