Tag: Dow Theory

RIP RICHARD RUSSELL

It’s weird sometimes how curiosity leads to understanding. I started reading John Mauldin’s weekly newsletter in 2002. He referenced the writings of Richard Russell in one of his letters. He wrote a daily subscription newsletter, but I found a number of his articles for free and was immediately impressed by his reasoning and logic. I subscribed to his Dow Theory Letter and read his thoughts every day. His sound arguments for owning gold convinced me to invest in gold stocks, gold mutual funds, physical gold, and upon its issuance GLD. This was 2004, so I enjoyed excellent returns over the next seven or eight years.

I stopped paying for his newsletter in the late summer of 2008. It was clear to me we were about to experience an economic meltdown and he came out with a huge BUY recommendation just before the September 2008 collapse. I lost faith in his advice. Nobody’s perfect, but I don’t need to pay for bad advice.

I still think he was a brilliant analyst and I owe him a huge debt of gratitude. I had never heard the name Ron Paul until Richard mentioned him as the one decent politician in Congress. I started reading the writings of Ron Paul and became convinced he was the only person in Washington DC who had the right solutions for the country. I became a huge supporter of his 2008 bid for the GOP nomination. My outrage at how he was scorned and ridiculed by the neo-con GOP establishment and their media mouthpieces at Fox News, led to me to write the first article of my life – Why We Need Ron Paul – which was kindly published by Lew Rockwell.

So, in a way, Richard Russell is responsible for this website. Thank you Richard, and rest in peace. You left at the right time. 

From Richard Russell’s Family

It is with great sadness that we report the passing of Richard Lion Russell on Saturday, November 21. Richard had gone to the hospital a week earlier with abdominal pain. He was diagnosed with blood clots in the leg and lungs and other untreatable ailments, but was able to return home under hospice care. He spent his last days surrounded by family and visited by close friends.

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MAYBE IT’LL BE DIFFERENT THIS TIME

Theories abound in the stock market world. Marketwatch has one story based on bearish sentiment of individual investors saying the market will surely soar to new heights. Just below that story they have one based on the Dow Theory that warns of a possible impending crash. I don’t give too much credence to individual investor bullishness or bearishness these days because there are virtually no individual investors in the market. Institutions and their high frequency trading machines control the market. Computers are pre-programmed to buy or sell based on some logic or signal. This indicator may have been useful up until 2001, but the Federal Reserve Put and Wall Street rigging have made it obsolete.

On the other hand, the relationship between the Dow and Dow Transports has been around for a century. Transports are a canary in the coal mine regarding the global economy. If trade and commerce begin to decrease, the Transports know it first. The Dow Transports hit a record high in November. They have steadily plunged by 6% since then, while the overall Dow has eked out a 2% gain. The MSM sure seems to be making a big hullabaloo about record highs, when we’ve only had a 2% gain in six months. This is called a topping formation.

Now to the hard facts. In the last 25 years there have been 14 times when there has been an equal divergence between the Dow and Dow Transports. They included 1990, 2000, and 2007. In 9 of these instances the Dow dropped by 5% to 10%. In 5 of these instances the Dow dropped by an average of 26%. I’m sure the paid hacks on CNBC or the highly compensated Ivy League educated Wall Street economists will have dozens of reasons why these facts don’t matter. They can ignore the facts, but they can’t change them. Maybe it will be different this time, and maybe Janet Yellen will raise interest rates by 1% this afternoon. I wouldn’t bet on either happening.