Richard Russell see's another 5ish years left to this Bear~
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Richard Russell
Dow Theory Letters
posted 16 October, 2002
Extracted from the 16 October, 2002 issue of Richard Russell's comment on Dow Theory Letters: Richard's Remark
The bear market started, according to Dow Theory, in September 1999.
But the question arises, when did the bull market start? I've been studying a chart which traces advance-decline volume, and it's clear from this chart, that the bull market started in 1974, not 1980 or 1982. I've always believed this myself, but this chart produced by my old friend, Ian McAvity in Canada ("Deliberations") convinced me that the great bull market actually started in 1974.
If that's the case, then the greatest bull market in history lasted for 25 years, 1974 to 1999. Bear markets tend to last from a third to a half as long as the preceding bull market. Then if this bear market runs true to form, it could last at least 8 years or from 1999 to 1907 (Editor's note - he means 2007) or possibly even longer.
That fit in with my "secret" intuition. Since I hate secrets, I'll tell you what my secret intuition tells me. It tells me that this is going to be a long, grinding, "wear you out" bear market. Look, the bear market is already three years old. Most people are still doing fairly well in their lives, not all but most. And despite huge losses in 401(k) programs and in individual accounts, people are still filling the restaurants, people are still spending money, housing prices are still very high, rents are still high, and in general I don't see people acting as if hard times or even difficult times are here.
And all this with the bear market having wiped out $8.5 trillion in market values, equal to 80% of a whole year's US Gross Domestic Product. You'd think the bear market losses would have put the brakes on consumer spending, but so far that's not really the case.
This tells me that this bear market is going to take TIME, a lot of time. And as I've said from the beginning, the Fed will fight the forces of compression and deflation -- they'll fight it tooth and nail.
Furthermore, look at stock valuations. They're still sky-high. Yeah, I know -- if you use the popular method used by the Fed of comparing stocks to the rate on 10 year T-notes, stocks appear "undervalued." But to my mind that pure baloney. Based on price/earnings ratios and dividend yield, stocks have a long way to go.
Anyway, that's the way I see the picture. This is a bear market that's early in its second psychological phase. For new subscribers I should repeat that the second phase of a bear market is the longest phase. It's the phase where stocks go down as they discount deterioration in corporate earnings, and often deterioration in the social and political fabric of the nation.
The second phase of a bear market is followed by the third and final phase. This is the phase where stocks are "thrown over" for whatever they will bring. Stocks in the third phase are dumped because people need the money The third phase is the phase where people who have "saved for a rainy day" wake up to find that it's raining. The third phase sees the final collapse of blue chip stocks. The blue chips are dumped in the third phase because they are the only stocks that are still liquid, the only stocks that can be sold in quantity, the only stocks that still enjoy a market. . .
Richard Russell
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O/T
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