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No Country for Young or Old Men

Richard Russell snippet
Dow Theory Letters
Mar 11, 2008

Extracted from the Mar 10, 2008 edition of Richard's Remarks

...Russell Comment -- The Fed is going all out in its effort to get the banks to start lending again. This includes taking in almost anything for collateral including those junky mortgage-backed bonds.

The new recognition -- we're not dealing with a liquidity problem, we're dealing with a solvency problem!

...The Stock Market -- where are we -- and what are we looking for? We're in a bear market, we don't know how long it will last, and we're looking for any indication that we might be near a bottom.

...There are actually two types of market bottoms. One is a temporarily oversold bottom, at which time stocks will not be priced at great values -- examples are the lows of 1957, 1962 or even 2002. The other type of bottom occurs when stocks are selling at great values as they were in 1942, 1949, 1974, 1980. These are the historic bottoms that occur once or maybe twice in a generation. What I'm watching for now is a temporary bottom that could possibly appear in the days or weeks or even months ahead.

...Question -- Russell, talk is talk, but what have you personally done with your own investments?

Answer -- I took my own advice. I've held large positions in gold, smaller positions in SLV and GDX, and the rest (about 60%) in T-bills. Not much income in this mix, but who needs it with the precious metals acting the way they have.

...Question -- Russell, I note that many top analysts are posting lists of good stocks that may be held during a bear market. A few analysts are saying that one should hold "value stocks" rather than "growth stocks" in a bear market. What do you think?

Answer -- My preference during a bear market is to hold few or no stocks. During a bear market usually at around 85% of all stocks will decline. Many investors during a bear market hope that it will be a shallow bear market -- and therefore, in view of tax considerations, it doesn't pay to sell their stocks. My own view is to hope for the best but prepare for the worst. On that basis, I'd prefer to be out of stocks, rather than finding myself "hoping for the best." Sometimes, hoping can turn out to be an expensive proposition.

...CONCLUSION -- The stock market is really in semi-crash mode. There are only two obvious pluses -- the first is that the Transports today closed 258 points above their January low. The second is that on January 22 there were 1,114 new lows against 412 today. The banks and many financials got killed today -- not good, not good at all.

Today may have been a 90% down day. I will get the final word from Lowry's. Since December there have been seven 90% down days without a single 90% up day. There's still no sign of any urge to buy stocks. The D-J Composite just missed making a new low today.

Hold tight -- keep your eyes on the Transports and keep your money in your pocket. This is "No Country for Young or Old Men."

Tomorrow, dear subscribers, tomorrow and tomorrow...

lots more follows for subscribers, and subscribing is a MUST..

written Mar 10, 2008
Richard Russell
website: Dow Theory Letters
email: Dow Theory Letters

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