Richard Russell has been writing about the stock market since the 1950s. He thinks we will see something like the Great Depression’s level of unemployment.
He is a master of Dow theory as a forecasting tool. He uses other indexes. Here is one.
. . . Buying Power since last February has been in a sideways movement — but in late-July Buying Power suddenly broke down and embarked on a long down-sloping trend. At the same time, Selling Pressure was gliding down gently but it suddenly turned up in late July. What we see now is the two indices spreading apart which is extremely bearish — Selling pressure is steadily increasing while Buying Power is dropping like a stone.
This clear and steady deterioration in the market’s internals is being masked or hidden by a parade of good news regarding the US economy and by a persistent and deceptive rise in the Dow. At some point in the near future, the weakening internals of the market will cause the Dow to buckle and the bear market will burst into view again.
The debt bubble popped. Its effects are long term.
The aftermath of debt bubbles, when they burst, is measured, not in years, but in decades. I’ve said before that my signal for the end of this extended top will be that time when the Dow breaks below 10,000. Once, having violated 10,000, I expect consumers to turn dead-bearish, and I expect the currently optimistic analysts to become pessimistic.
Once again I beseech (beg) my subscribers to be OUT of stocks. The outlook for the markets, all of it, is now very bearish. We are watching the greatest debt bubble in history about to deflate, and it won’t be a pretty sight.
He favors gold. “Gold will be the last man standing as it has been over thousands of years.”
He thinks we are in a bear market.
At the start this site I mentioned that already 6.3 trillion dollars have been lost in this early, and I emphasize, early, stage of the bear market. The essence of what I foresee ahead — we are now moving into the second half of one of the greatest bear markets in history. It will not be a time for making money, rather it will be a time for austerity and survival.
This is very strong language.
Already the early signs of pain are appearing, and of course what I’m talking about is unemployment well above the present level. During the 1930s unemployment rose to 25%. I think ultimately we will again see unemployment above 25% before this bear market ends.
Then why are prices rising?
Signs of inflation are now appearing. Super Bowl ads for this year have already sold out at the price of 4 million per 30 seconds a piece. Starbucks has just raised its prices. The prices of oil, silver and gold have surged higher today — all signs of inflation. Almost all commodities closed higher as well.
It is possible to have high unemployment in hyperinflation and deflation. Will the FED sit on the sidelines? No. It will inflate. But if it does not hyperinflate, we will get a major recession.
I don’t think this is likely until short-term interest rates move up sharply, indicating a credit crunch. That is nowhere near happening.