richard russell comments

  1. 8,034 Posts.
    January 17, 2003 -- "America is addicted to low-cost consumer goods produced outside it borders. The demand for imports will push the trade imbalance out to more worrisome levels in the months to come." So said Chris Rupkey, senior financial economist for Bank of Tokyo--Mitsubishi in New York a day ago. And damned if he wasn't right --

    The US trade gap in November widened to a record $40.5 billion. That reflected a record inflow of holiday and other consumer goods. Biggest gap was with China -- the gap rose from $9.5 billion in October to $10.5 billion in November.

    On the news this morning the March Dollar Index sank to a new low at the opening, the March 30-year T-bond rose 15 ticks, and the S&P futures plunged 950 points. I'm writing this early part of the site half an hour after the opening, so I have no idea how the market will close.

    One of the strangest current situations is the contraction in the M-3 money supply, this in the face Fed. Governor Barneke's statement that the Fed possesses "a printing press," and it's not afraid to use it. But in the face of the Fed's fear of deflation, why in the world would M-3 (the broad money supply) be shrinking? Maybe the wisest words on the subject has been heard from my friend, A. Gary Shilling --

    They can flood the banks with money, but the banks are scared to lend, and creditworthy borrowers don't want to borrow. So we're pushing on a string.

    Sometimes it pays to just step back and look at the BIG picture. And as I see it, this is the big picture. Japan, the world's second largest economy, continues to be mired in recession. It's like "Help, I've fallen down, and I can't get up."

    Germany, the world's second largest economy and the so-called "economic engine of Europe," is sinking into a second-dip recession. The Federal Statistics Office of Germany reported yesterday that the German economy grew just 0.2 percent last year, its worst performance in a decade. As retail sales plunged and unemployment rose above four million, economic growth in Germany ground to a halt. And few economists now see anything that suggests that the German economy has come back to life.

    That leaves the US as the sole savior of the global economy. Is the US up to the task? That's the trillion dollar question. My own instinct is to say "No," but I always defer to the market, and so far, the market has held above its October low.

    If the October lows hold, then it's probable that the US will follow my friend, John Mauldin's scenario. John forecasts coming years when the US will just "muddle along," neither booming nor busting, just, well, just "muddling through."

    If the October lows are violated, and I believe that in time they will be violated, then I think we will see all kinds and varieties of trouble, including the current recession (and I believe we are still in recession) turning into something much nastier.

    So in the big, or I should say BIG picture, the October lows are KEY to our future.

    And just in case you forgot, the October 9 low for the Dow was 7286.27. Write it down, dear subscribers, it is

    Dow 7286.27.

    Of course, Dow 7286.59 must be viewed as the final line of defense. But above the October low is the very important December closing low of 8303.78. Let me put it this way, Dow 8303.78 is the first line of defense and 7286.27 is the final line of defense.

    Question -- Russell, what do you think the odds are of both of those Dow numbers breaking?

    Answer -- I believe that in due time the Dow will violate both of those "lines of defense." The reason -- we're in a primary bear market, and in bear market values deteriorate through time. Time is against those who hold stocks in this bear market.

    Question -- I note that the gold shares seem to be lagging gold, the metal. True, many of the gold stocks have made huge moves over the last year or so, but now the gold shares seem reluctant to go to new highs, even though gold is going to new highs.

    Answer -- First, the gold shares are still common stock shares, and common stocks are in a bear market. Thus, I believe the fact that common stocks in general are doing poorly, is "rubbing off" to some extent on the gold shares.

    The second reason, and this is important, is that I believe a lot of people are of the opinion that gold has risen because of the impending war in Iraq. "And, if there is a war, is will be a short war. Furthermore, when the war ends," they reason, "gold will collapse, and we'll be holding gold shares at a loss. Thus gold shares are risky holdings, which are dependent on a fleeting war situation.

    As I see it, both theories are wrong. Gold started up in March of 2001 well before Bush decided to attack Iraq. The rise in gold is a response to the falling dollar and the chances of either inflation or deflation. In the big picture, I don't think Iraq has much to do with the rise in gold.

    TODAY'S MARKET ACTION -- In a words -- lousy.

    My PTI was down 6 to 5238 with the moving average at 5244. PTI turned bearish today.

    The Dow was down 111.13 to 8586.84. Dow broke below its 50-day MA and has turned bearish. Two movers in the Dow today, MSFT down 3.89 and IBM down 4.75. MSFT to split two-for-one and pay a dividend. Big deal on the dividend, you buy 1000 shares of MSFT and you get a dividend of $16.00. You know who get the money -- Willie Gates. Next case --

    Feb. crude up .25 to 33.91.

    Transports was down 27.75 to 2344.53.

    Utilities down 2.06 to 219.11.

    Advances were 1105 and declines 2167. Up volume 317 million and down volume 1.021 billion. Down volume was 76% of up + down volume. Not a good day at all.

    New highs were 112 and new lows were 17. My High/Low Index was up 95 to minus 7074.

    Total NYSE volume was 1.35 billion shares.

    S&P was down 12.81 to 901.78.

    Nasdaq was down 47.56 to 1376.19 on an increasing 1.618 billion shares -- this was a "distribution day" for the Nasdaq.

    This is important -- my Big Money Breadth Index was down 6 to 682 and now only 2 above its bear market low of 680 recorded on Nov. 1. If this Index breaks 680, it will be a bearish omen.

    March Dollar Index was down .23 to a new low of 100.89. March euro was up .38 to a new high of 106.29. March yen was down .07 to 85.00.

    March Nikkei was down 15 to 86.10.

    Bonds were higher with the March T-bond up 21 ticks to 111.02 to yield 4.92%. March 10 year T-note up 16 ticks to 113.25 to yield 4.01%. Money moving to safety.

    Feb. gold down 1.30 to 356.80. March silver down 2 to 4.81. April platinum up 4.70 to 619.00. March palladium up 7.50 to 258.00.

    Gold/Dollar Index ratio down .50 to 353.70.

    XAU down 1.88 to 75.30. HUI down 3.11 to 143.09.

    Gold advance-decline line down 17 to 1119.

    AEM down .37, AU down .40, CDE up .01, GFI down .38, GG down .37, GLG down .21, HMY down .63, NEM down .87, MDG down .46, SIL down .35. See above for comment on gold shares.

    STOCKS -- My Most Active Stock Index was own 5 to 196.

    The 15 most active stocks on the NYSE were -- NT down .09, GE down .17, AMD down 1.11, HD up .32, EMC down .45, TYC down .33, DYN down .18, AOL down .38, PFE up .08, IBM down .4.38, ACF up .30, NOK down .57, NOK down .57, MCD down .44, WMB up .22, GLW up .20.

    They're still playing the techs. Hope, hope, and more hope and maybe a bit of hype. "The techs are down so low that they've got to come back." Yeah, whatever.

    More -- GM up .27, SBC down .57, CSCO down .77, INTC down .86, KSS down .66, TGT down .52, WMT down .33 to 49.97, JCP down .66, ED down .12, PDG up .03, KSE up .08, SO down.24, MER down .75, FNM up .73, JPM down .59, MWD down .55, GS down 1.04, HPQ down .76, DELL down .70.

    VIX was up 1.01 to 28.68. Option-writers a bit more worried.

    McClellan Oscillator broke to minus 44 today, thereby plunging below zero and turning bearish. Just another sign that this market is in trouble. Now it's' a case of how MUCH trouble the market is in We should know shortly.

    CONCLUSION -- Important -- The Dow and the S&P both closed below their 50-day MA thereby turning bearish. The Nasdaq gapped down below its 50-day MA thereby also turning bearish.

    All major averages are now bearish on my method of reading the moving averages.

    Why, what's happening? I think it's it can be described in one word -- deflation.

    Also -- trade deficit is widening, dollar is sinking, profits are getting hit, lay-offs are continuing, and consumers may be cutting back. Consumer sentiment is plunging. All in all a rotten situation, but no big liquidation of stocks yet -- just erosion. Sellers are not ready to dump yet -- but buyers are leaving the scene and stocks just erode away.

    Sorry I can't be more optimistic, but I say it as I see it.

    A bit more tomorrow, and then Monday (thank you Mr. King) a holiday.

    See ya tomorrow --

    The R man (lots if literature below).

    You think it's fun being President? This from the January 16 Financial Times -- "Two months into the imperium of George W. Bush, the wheels are wobbling alarmingly on the Presidential chariot. . . . Last week the Gallup organization added its definitive statistical verdict on recent events. Mr. Bush's approval rating is at its lowest level since September 11, 2001. Support for his economic policies has dropped below 50 percent. Even his foreign policy approval numbers are barely above 50 percent."

    Subject: S&P

    This is the trend.........until it changes.


    Phil M

    Subject: Wall Street's Guru's Asset allocation.

    Richard, More of the same from the Street. I think your comments on this would be valuable to your readers who use you as a “check” to their brokers.

    With multi-billion dollar cash settlements and Elliot Spitzer making the rounds, you would think asset allocations would have become more risk averse / defensive in their approach….See below, the Street has not changed and it would appear that Merrill Lynch is still in active discussions with Spitzer’s crew.

    From the Dow Jones 1/16 at 11:57

    Firm Strategist Stocks Bonds Cash Other
    A.G Edwards Mark Keller 70% 20% 10% -
    Banc of America Tom McManus 70% 20% 10% -
    Bear Stearns Kurt Walters 65% 25% 10% -
    CIBC World Mkts. Subodh Kumar 75% 20% 2% 3% (commodities, real estate)
    Goldman Sachs Abby Joseph Cohen 75% 22% 0% 3% (commodities)
    Legg Mason Richard Cripps 60% 40% 0%
    Merrill Lynch Richard Bernstein 45% 35% 20%
    Morgan Stanley Steve Galbraith 70% 25% 5%
    Raymond James Jeffrey Saut 65% 10% 15% 10% (real estate)
    Salomon Smith Barney Bill Helman 60% 30% 10%
    UBS Warburg Ed Kerschner 89% 11% 0%
    Wachovia Ken Liu 75% 25% 0%
    I wonder if we are all looking at the same markets…….

    Bradford D. van Siclen
    Managing Director
    Joseph Gunnar & Co.
    30 Broad Street, 11th Floor
    New York, New York 10004
    tel: 212.440.9692
    fax: 212.440.9668

    Russell Comment -- What can I say -- they just don't believe this is a bear market, at least not yet.
    Rah-rah CNBC had the suckers going for a ride

    By Martha Smilgis
    Special to The Examiner

    THERE IS NO doubt in my mind that we fools who have religiously watched CBNC over the past three years have lost money in the stock market. My proof comes from the network's ratings. When the Nasdaq zoomed to astronomical highs, CNBC's viewership soared as well. Now, with the Nasdaq in free-fall, we remorseful investors click off the tube. The network of promise has become the network of pain.

    History, however, teaches us to behave differently. The more scholarly sages of Wall Street tell us that the 6 percent of investors who buy at the bottom of the market make money and the 80 percent of us who fell for the CNBC daily drumbeat of casino hype -- and bought tech stocks near the top ---- are, simply put, suckers. We suckers are now turning away from what was our favorite feel-good network, disgusted at the sinking value of our once-beloved stocks.

    Back during the tech boom, we usually sober and circumspect investors were snookered by CNBC's happy-faced anchors and climbing green ticker tape set to a background of pulsing music. At the dawn of 2000, CNBC was suddenly everywhere. It became the wallpaper network. The familiar gang of personality-plus anchors appeared in offices, kitchens, barrooms, liquor stores and even gas stations. Elevators and gyms were lit up by the dancing ticker tape under those ebullient faces.

    Just a year ago, in powerhouse urban centers, sophisticated dinner conversation actually focused on how in the world Joe Kernen's tousled hair and lopsided grin got him a Playboy layout. (In case you don't recognize the name, he's CNBC's wiseacre stock specialist who looks like he's falling off his chair.) Intelligent career women debated whether or not Sue Herera wore too much makeup and speculated as to which Wall Street mogul Maria Bartiromo, the Sophia Loren lookalike, had married. And no one can deny that the boyish charm of Bill Griffeth is infectious, while the broad-shouldered Ted David relates his diet woes in an amusing manner.

    WHAT WE HAVE here is a colorful cast of television characters with distinctive personalities and entertaining cross chat. What we don't have is a group of serious business journalists. OK, save maybe Ron Insana with his skeptical and quizzical asides, but overall, as a group, we are talking about a parade of bubbleheaded television readers.

    Herein lies the problem: We foolish viewers and equally naive investors attributed some type of critical skill to their performance. What a mistake! The CNBC bubbleheads are simply unquestioning promoters who created a friendly platform for every con artist analyst to come aboard and hawk his or her bogus stock estimates. And were they bogus! The reward for most outrageous performance goes to Walter Piecky, tech analyst for Paine Webber, who issued a BUY on Qualcom at $420 a share with a target price of $1,000! This with a straight face, no less. (Today Qualcom hands on at $61)

    The BUY-BUY-BUY mantra of these guest analysts spouted on CNBC would be humorous if we investors hadn't lost so much money. Checking the stats, one now realizes that 98 percent of all stocks mentioned were BUYS with a paltry 2 percent SELLS. What's even more amazing is that, even now the Nasdaq scraping bottom, these charlatan magpies are still crowing BUY, this time on Value stocks, many of which have already hit new 52 week highs!

    Of course, what you don't learn from the cheerleader network is that each guest analyst on the show is paid by a brokerage house that makes money off the stock the analyst promotes. (Mary Meeker, tech anlayst for Morgan Stanley made $15 million in 1999 going on CNBC telling viewers to buy Priceline at $165 a share ---- now down to $2.) Along with not bringing these critical behind-the-scene details to the viewer's attention, our happy-faced anchors don't even question those with obviously vested interest in the companies they are promoting. Too often, eager-beaver mutual fund managers come on to pump (and then later dump) stocks they own.

    NOW THAT TECH is in the toilet, it is curious how the cheerleader network has changed. When you do hear a "downgrade," it is practically a whisper. Natch. Analysts don't get paid to downgrade a stock, for all we know they probably get a salary deduction. The real joke is that the few downgrades that you do hear come in after the horse is out of the barn. Downgrading a stock that is at a 52-week low, takes brains? Pulease!

    The sooner CNBC banishes analysts and the annoying static they create, the better. But there's a fat chance of that happening, because the network relies on them for news. Our happy-faced anchors aren't about to do any investigative reporting and actually give us an objective account of market conditions. Instead, they are too often shills for the financial industry ---- one often known to fleece the investor.

    Those of us with long careers in journalism know that traditionally those with the least talent go into biz reporting. It is a place to start, like writing obits.

    But now with the brainpower of the baby boomers swerving over to business, thanks to their once-plump IRA accounts, you would think we could get some top-notch biz journalists front and center instead of a lineup of Wall Street manipulators out to pad the pockets of brokers, analysts, fund managers and yes, the silver-tongued anchors.

    Viewers beware: Watch at your own risk!

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