Richard Russell, author of the Dow Theory Newsletter, is out with some sobering thoughts today. According to Dow Theory, the Dow confirmed the continuation of the bear market today after briefly appearing like we were on the precipice of a new bull market just 3 weeks earlier. He says the “country is now at economic WAR.” He also points out that most great bear markets end with stocks yielding 5-6% and PE ratios in the single digits. Currently, the &P yields just 2.78% while the PE ratio is 17.90.
I’ve done everything in my power to prepare my subscribers for today’s turn of events. In thinking about it, I’m afraid I should have been more emphatic. The deed is done, and the great primary trend of the market and the economy is reconfirmed as bearish.
This looks to me to be the correction of the 64 years of inflation and debt-building that has gone on ever since World War II. I see the months ahead as being very difficult, but I’ll do my best to be helpful to my subscribers. I lived through the Great Depression and combat in WW II. I can’t imagine that the years ahead will be more difficult than those old bleak and frightening days. For decades the American punch bowl overflowed, with the help of the Federal Reserve and the creation of unconstitutional fiat money.
There’s little sense in analyzing today’s market minutiae, the market did what it had to do. It pointed the way for stocks and the economy. The Founding Fathers and creators of the Constitution must be shaking their heads and smiling wryly. The money system that they had so carefully inserted into the Constitution had been thwarted and degraded. Now we must pay.
Although dramatic, his words can’t be overlooked. If you’ve been a reader here you know that we’ve been very bearish for a long time. Risk levels are extraordinarily high at this time though we are beginning to see some signs that a capitulation sell-off is in the making….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.