Q - Where do you see the Dow going before this bear market is over?
A - One thought has been on my mind, and I haven't written about it.
The 1921-29 bull market started at a low of 63.90 in August of 1921.
The great 1929-32 bear market ended in July of 1932 with the Dow at
41.22. Thus, the great bear market ended with the Dow below the
level at which the preceding bull market started. And I wondered,
what if this bear market ends with the Dow below the level at
which the preceding bull market started? If you believe the
bull market started in 1982, then you're talking about a bear
market low below Dow 776. If you believe the bull market started
in 1974, then you're talking about a Dow below 577. Unthinkable,
yes, but in this business anything can happen. And nothing is
unthinkable.
Q - I note that a number of analysts are now saying that October
9 was THE bottom for this bear market, and that the worst has been
seen. Do you think that's true?
A - The most fundamental thesis of Dow Theory is values. George
Schaefer, probably more than any other Dow Theorist, stressed
values. A major problem of investors has been the fraudulent
earnings that have been posted by so many corporations. The
reason for this has a lot to do with options. Because so many
executives' perks were tied to options, the various executives
did whatever they could get away with - to boost earnings,
which in turn would boost the price of their company's stock
price. The whole process was disgraceful. But a new thesis
has arrived. "Too big to prosecute." The fear is that if many
of these companies are prosecuted on the basis of deceitful
earnings, then there will be trouble in the form of additional
lay-offs.
As is evident above, reading Richard Russell can be described as a contact
sport. He readily admits he is too old to care about what others think
of his writing and yet I believe he cares too much for his 12,000 plus
subscribers to write anything other than exactly what he feels will help
his followers traverse the world of investing. As its editor-publisher,
Richard Russell began his
Dow Theory Letters
in 1958, and he has been
espousing the virtues of "Dow Theory" ever since (never once having
skipped a Letter). Russell's newsletter is the oldest service continuously
written by one person in the business.
Born in 1924, Russell, a native New Yorker, was educated in the East at
Rutgers and NYU. He flew as a combat bombardier during World War II.
Now living and publishing his newsletter from the California coastline
in La Jolla, Russell dates his exposure to Dow Theory all the way back
to his days combing through stock market info at the New York Public
Library in the mid-1940's. It was there that Russell happened upon
the writings of prominent Dow theorist Robert Rhea. In a quote from a
Barron's interview Russell admits "I was totally fascinated by what
he {Rhea} wrote. The material really made a lot of sense to me. It
was the first time I really got a feel for the market. I studied
every word and sentence Rhea ever wrote until I couldn't see straight."
Russell gained his own prominence while writing a series of articles for
Barron's during the late-'50s in which he insisted, during a deep stock
market correction, that the market was still in a bull phase with a ways
to go. He was right, and the bull, grudgingly, doubled over the next
eight years, before toping in 1966. His Barron's articles on Dow Theory
thrust him into the spotlight and he found his newly launched Dow Theory
Letters began to grow in subscribers. His newsletter, published every
three weeks, covers the US stock market, foreign markets, bonds, precious
metals, commodities, and economics -But don't be surprised to find
political comments or family notes mixed in with market commentary.
If you are lucky or if you own his CD newsletter library, you will
get anecdotes about his time serving our country during WWII.
Known for his strict adherence to Dow Theory, Russell scoffs at those who
would pronounce Dow Theory as antiquated and obsolete. He is quick to
point out that Dow Theory at its core is simply buying great values and
selling those values when they have become overpriced. All other
guidelines in the theory are secondary to value. So as the neophyte
works to understand the theory he or she would be best to heed Russell's
warning - Values are the main factor in any consideration of the rest
of the Theory's guidelines.
As is evident above, reading Richard Russell can be described as a contact
sport. He readily admits he is too old to care about what others think
of his writing and yet I believe he cares too much for his 12,000 plus
subscribers to write anything other than exactly what he feels will help
his followers traverse the world of investing. As its editor-publisher,
Richard Russell began his