A dire forecast from Richard Russell indeed. Its within the bounds of our own probability as we have said.
We believe it will play out in slower motion until an event triggers the actual slide. This makes timing very difficult. What makes it even more difficult is that the dynamics are progressive with time.
The magnitude of the trigger event necessary to precipitate the collapse decreases with time until it reaches the point of near triviality. At the same time the forces built up behind the crash potential dissipate with time, resulting less force behind the decline. This is the equation that determines the different profiles of a 1929 and a grinding slide of a 1973-74.
Time to button down and get into hard assets, and let's see what happens. We see 1255on the SP 500 as an important support level but not the showstopper. We have underestimated the manipulative tricks of the Merry Pranksters at the Fed and Treasury before.
August 19, 2008
Richard Russell's Dow Theory Letter
My PTI was down 6 today to 5910. Moving average was 5931. PTI remains bearish by a large 20 points!
What do we do? Where do we go? Put your money in T-bills and await the coming next great buying opportunity with good stocks scraping the bottom. The stock market is now in full crash mode, and where it ends nobody knows.
In the meantime, the US balance-of-payments continues in negative shape. As I've written so many times, we're a global empire living on borrowed money. Our goofy president insults our biggest creditors -- Russia and China -- and seems totally oblivious of the situation. No empire can continue afloat while borrowing money to do so. At some point, nobody will lend the US money, at which point the empire starts to unravel. The dollar plunges, the US becomes a paper tiger. The all-important reserve status disappears.
I'd like subscribers to get rid of all non-bullion gold items and build cash. Sell GDX, SLV, XAU, HUI, and get flush with cash for the bargains that lie ahead as this market moves towards its inevitable final low.
