Reality check about what big picture looks like for an old fart a little older than I am.
Good night all
Jim Black
Russell celebrates by selling bonds
By Mark Hulbert, CBS.MarketWatch.com
Last Update: 12:01 AM ET July 18, 2003
ANNANDALE, Va. (CBS.MW) -- Happy birthday, Richard Russell.
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HULBERT FINANCIAL DIGEST
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Russell, the dean of the investment newsletter industry, turns 79 on Tuesday.
He has been publishing his Dow Theory Letters every three weeks since 1958, 45 years ago. No other newsletter editor who is publishing today can say that.
Russell celebrated his birthday early by selling all his bonds this past Tuesday -- "every last one."
Why did Russell do it?
Because "the U.S. is heading for maybe the greatest financial mess in world history. The U.S. is far too extended financially, militarily and socially in the way of entitlements that we can't afford."
Won't our income drop if we sell our bonds and are forced to invest the proceeds at today's dirt-cheap interest rates?
It sure will, but Russell says that we had better get used to getting by on less. "That's going to happen anyway, so you might as well get some practice at it now."
This Russell guy sure is a barrel of laughs, isn't he?
To cheer him up, I will report that his stock-market timing record is in first place on a risk-adjusted basis among all market-timing newsletters the Hulbert Financial Digest has tracked over the past 23 years.
That means we should pay special attention to what he says.
Since June 30, 1980, when the HFD began monitoring newsletters, and this past June 30, you would have made 11.2 percent annualized by switching between the Wilshire 5000 index and 90-day T-Bills on Russell's grading of the stock market's primary trend.
That compares to a 12.6 percent annualized return for buying and holding.
But here is the kicker: Over the past 23 years, Russell's advice has been 45 percent less volatile, or risky, than the stock market as a whole.
So in return for immunizing his followers from nearly half the market's gyrations, Russell has cost his subscribers only 1.4 percentage points per year in profits.
That's an impressive trade off, which accounts for Russell being in first place for risk-adjusted market timing performance over the past 23 years.
Despite Russell's pre-birthday gloom, he is not yet advising the sale of the S&P Spyders (SPY: news, chart, profile) or Dow Diamonds (DIA: news, chart, profile) that he has been recommending for several months to those subscribers wanting to play the stock market's rally. But he does suggest close stops.
The only long-term investment that Russell likes right now is gold, which he thinks "is in the very early phase of its bull market."
"As the bear's grip tightens on the economy, the first rush will be to accumulate dollars... But when the nation hits the wall of [the Federal Government's unfunded liabilities, estimated at more than $40 trillion], the dollar will start to unravel as the U.S. attempts to print its way out of disaster. That's when people will turn to gold."
Russell currently is allocating around 10 percent of his personal portfolio to gold mining companies. His favorite is Newmont Mining (NEM: news, chart, profile).
Editor's note: The most recent edition of the Hulbert Financial Digest is now available by either e-mail or regular mail. Highlights this month include:
* Marking 23 years: Long-Term Performance Ratings on more than 160 newsletters and over 500 portfolios.
* Profiles of On the Money, Good Fortune, Growth Fund Guide and Stockmarket Cycles
* Complete performance scorecard, and more
For more information or to subscribe to the Hulbert Financial Digest, click here.
Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.
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