Posted on 03/07/2013 10:25:13 AM PST by blam
RICHARD RUSSELL: I've Never Seen Anything Like This 'Post-Crash Upward Correction'
Sam Ro
March 7, 2013, 10:37 AM
Dow Theorist Richard Russell, a long-time bear on the markets, recognizes that a Dow Theory buy signal has appeared.
But he has doubts.
"History was made when the Dow rose to a new record high and finally confirmed the prior record high put in by the Transports," said Russell via KingWorldNews. "The question now becomes -- what do we have here, a weird kind of bear market or a new bull market?
In a nutshell, the Dow Theory says that if Dow transportation stocks and Dow industrial stocks confirm each other's movements high (or low), a buy signal (or sell signal) has been indicated.
But based on Russell's rejection of the buy signal, it appears that he think Dow Theory is more art than science.
Here's Russell via King World News:
Question -- OK, Russell, then what about the record highs recorded by both the Dow and the Transports?
Answer -- My only answer to this is that both D-J Averages produced something never seen before, namely new highs during a post-crash upward correction. My explanation of this unprecedented situation is that the advance to new highs was a direct result of never-before-seen manipulation by the Federal Reserve.
The Fed was able to engineer new post-crash highs in both D-J Averages. But I doubt if the Fed will be able to engineer a coming new era of prosperity in America. Thus, it will be an example of where the stock market will not be predicting the nation's economic future.
As a matter of fact, I believe this stock market is predicting a very mixed and confusing economic future for the US.
(snip)
So, Russell is sticking to his bearish guns.
(Excerpt) Read more at businessinsider.com ...
When the money supply is inflated the markets will go up...
I would like to see a DOW chart that is indexed off the REAL value of money....
ABSOLUTELY! What we are seeing is the devaluing of the currency but hard assets (corporate property, equipment, facilities, etc.) have “intrinsic” value. We are also seeing both inflation and cost reduction at the same time.
For example, if an asset (a tractor for a semi) takes 1000 man hours to produce and $10000 in materials at the days rates it is created, then it has a “value” baseline. If that man hours to produce cost $10 then we have a $20,000 baseline “value”. The sales PRICE at the baseline date is $30K (50% markup).
If the currency is debauched (devalued) so that it now buys LESS than before, say the currency is only worth 1/2. Then that same $20K base “value” is now $40K AND the $30K sale price is now $60K.
On top of the “funny money” games the interest rates are being kept ARTIFICIALLY LOW! So that businesses, and banks, can acquire capital more easily. Cost of goods and services rises, the “inflation” is built into the price of everything, and the “profit” goes up. Because the “profit” is with cheaper dollars that are actually worth less than before.
ABSOLUTELY! What we are seeing is the devaluing of the currency but hard assets (corporate property, equipment, facilities, etc.) have “intrinsic” value. We are also seeing both inflation and cost reduction at the same time.
For example, if an asset (a tractor for a semi) takes 1000 man hours to produce and $10000 in materials at the days rates it is created, then it has a “value” baseline. If that man hours to produce cost $10 then we have a $20,000 baseline “value”. The sales PRICE at the baseline date is $30K (50% markup).
If the currency is debauched (devalued) so that it now buys LESS than before, say the currency is only worth 1/2. Then that same $20K base “value” is now $40K AND the $30K sale price is now $60K.
On top of the “funny money” games the interest rates are being kept ARTIFICIALLY LOW! So that businesses, and banks, can acquire capital more easily. Cost of goods and services rises, the “inflation” is built into the price of everything, and the “profit” goes up. Because the “profit” is with cheaper dollars that are actually worth less than before.
According to this, the Dow is 11% under its all time high, when adjusted for inflation:
http://buzz.money.cnn.com/2013/03/06/dow-record-inflation-adjusted/
Adjusting due to inflation caused by quantitative easing, i.e inflation I presume?
This individual seems to confirm what I have heard; that the Federal Government is supporting directly or indirectly the recent market rise. Those managing our government recognize that most Americans learned that the stock market signaled poverty or prosperity. Thus, the government managers inflate the market to lull the people into a false sense of prosperity. Pure propaganda!
This is a pure melt-up due to “liquidity”. People who are happy with money-printing claim there is little inflation. Well, “inflation” is the act of bloating the money supply. Once the central bank pushes the newly printed money into the economy it cannot control what effects it will have and where.
Two cycles ago, the “liquidity” went into dot com stocks. That didn’t work out too well. After 9/11/2001, it went into housing. That didn’t work out too well. Now it appears to be going into bonds and secondarily into stocks. Look out below!
This is a classic case of “pump and dump”. Media will crow about how well the stock market is doing for a few weeks drumming up a lot of interest from the low information voter that will turn from safer investments to stocks while people in the know divest stock and invest in hard assets.
I read an article yesterday that stated Buffet was dumping massive quantities of consumer-based stocks.
He knows what is coming...and very soon.
The RATS are about to jump ship and are suckering in the ignorant masses and leave them holding the bag.
Forget history. This country is in uncharted territory.
This will be one for the history books and I feel it will end badly.
“Industrials” have not comprised most of the Dow index for a very long time. Even the language, “American-based” arouses suspicion that associated manufacturing doesn’t happen on US soil.
The Dow is based much on funny money from debt, so it could possibly go up, in general (with the usual fluctuations), until the bond collapse happens. Most incomes are based on funny money, by the way: recirculating debt. When many more investors flee bonds, that’ll be all she wrote.
Who cares why it happened, the clear result is that everybody who has been calling for a market crash over the past 4 years has been an idiot.
Saying “we would have been right, EXCEPT for these things”, just shows that they failed to take into account the effect of “these things”, whatever those things were.
The market could crash tomorrow. And no doubt, there will be 100 analysts the next day who will brag about “calling” the crash.
But my guess is most of them would be broke if they invested based on their own “calls”.
Given the market has climbed from under 7000 to over 14000 over the past 4 years, the “suckers” clearly are those who stayed out.
Of course, tomorrow is another day.
The only suckers are those who didn't cash out when obongo was sworn in to another term. If you're still holding in the belief that your stocks, like home values in 2006, can only go up, up, up from here on out, then bless your little heart.
Well, the day after Obama WON his election to the second term, the DJIA closed at 12,932 (November 7, 2013).
The day after he was sworn in for his second term (January 21, 2013), the DJIA was at 13649 (markets were closed that day for MLK day?).
Today it is at 14329.
So, maybe tomorrow we will all be suckers. But from his re-election, those who didn’t cash out have made 10.8% in about 4 months (about 30% annualized).
And from his inauguration, those who didn’t cash out have made 5% in 2 months, about a 30% annualized return.
So again, who is the sucker? The one who pulled out at election, or inauguration, or the one who stuck it out until today?
I’m not saying the market won’t crash tomorrow. I’m not saying that I expected the market to go up after he was re-elected. I’m saying that, from where we sit now, those who pulled money out earlier lost money.
Maybe today was the day to pull out. But if the person saying so today is the same person who said it a year ago, I have no reason to believe them.
I’m mad that the market has run up so quickly, because I’m not retiring yet, so I’m still investing in my 401k, and I’d rather be buying stocks at 12,000 than 14,000.
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