Last Bear No Longer Standing?

There's an old Wall Street adage that says bull markets don't end until there are no bears left standing. While not literally true -- even just prior to the 1929 and 1987 stock market crashes more than a few pessimists were warning that share prices had gotten totally out of hand -- the theory has sometimes been validated by the public about-face of one or more high profile bears. In "A Superbear Turns Bullish," Mark Hulbert notes that a long-time grizzly now sees an "unprecedented world boom."

Has Richard Russell finally thrown in the towel on his long-standing bearishness?

You be the judge.

Richard Russell, of course, is editor of Dow Theory Letters, and the granddaddy of the investment newsletter world. He has been editing his newsletter continuously since 1958, nearly 50 years ago, longer than any other newsletter editor still publishing.

He's seen a lot of bull and bear markets, in other words. And his long-term record is superb. According to the Hulbert Financial Digest, his timing signals for the stock market's major trend rank at the top for risk-adjusted performance since 1980, when the HFD began monitoring the industry.

Nevertheless, Russell has failed to extend diplomatic recognition to the bull market that began in October 2002, arguing instead that a major bear market that began in late 1999 was still in progress. Fellow columnist Peter Brimelow even took to referring to Russell as a "grump."

Now read what Russell wrote last night on his website:

"We saw something that is extremely rare [on April 20 and April 25], in fact I can't remember ever having seen this before. What I'm referring to is that on those two dates all three Dow Jones Averages -- Industrials, Transports, and Utilities closed at simultaneous historic highs. To me, a fellow steeped in Dow Theory for over half a century, this was like a clap of thunder... My take on the situation is that the stock market (and the Dow Theory) told us that an unprecedented world boom lies ahead."

Russell acknowledges that what he has written will surprise many who are accustomed to his long-standing caution about the stock market. He imagines that we will want to respond by saying "But Russell, you're usually so conservative, so restrained. How can you possibly talk this way? Now you're talking about a worldwide boom. Are you smoking something we don't know about?"

Russell's response:

"I stopped smoking over 40 year ago. No, I'm simply relating to you my interpretation of what the market is saying. I believe the markets talk in their own secret language. And when the market does something that has never been done before, that serves as a 'kick in the pants' for me. It's telling me, 'Russell, wake up. Something very unusual is going on. Get up out of your chair -- and pay attention'."

While I happen to think Mr. Russell is a smart guy with lots of interesting things to say, I can't help but think that the timing of his sudden change of heart will turn out to be less than fortuitous.

Comments

[Brian]

Looks like we are approaching the crest of the liquidity wave with this movie production. Once thing for certain is that you can always count on humans to make complete fools of themselves and the upper crust to continuously bamboozle the poor lumpen as he is attracted to this pathetic display of corporate greed. People still don’t get it do they. I just believe the "American Consumer" (that’s what we have been labeled, how sad) is turning into a pathetic excuse for a human being. I’m really starting to dislike what I see in people as they place so much importance on material items and the cultural waste that is spewed out of Hollywood. BTW, if it were up to me I would send Paris Hilton to Abu grab Prison for a month, then let’s see here attitude when she returns. Roll model my a**, I fear for my daughters well being looking at this pathetic person. Until next time Mike, take care and keep up the good work. Brian.

[Babak]

Sounds like you're not familiar with neither Russell nor the Dow Theory.

In fact I love all this pessimism!! (aka point! this means we're in a bubble, point! that means we're topping, point! etc..)

You're siding with the retail investors (ala AAII) who are 54% bearish!
http://www.tradersnarrative.com/aaii-sentiment-now-more-bearish-after-market-rise-904.html

When people stop posting this sort of entry and interpreting everything through the lense of bearishness... that will be the day the market will top.

Until then...

btw if you want to see a bubble, check out China

http://www.tradersnarrative.com/want-to-see-a-real-stock-market-bubble-929.html