There’s a Hard Rain Comin’
Richard Russell, Author of the Dow Theory Letters, 1924-2015
Richard Russell launched his three week letter in 1958. He based it on Charles Dow’s Theory that the Industrials and Transports need to confirm one another either up or down. He eventually devised his own Primary Trend Index in 1969. He called the top in 1966 and the bottom in December 1974.
He lived through the Great Depression as well as the bull markets of 1948-66 and 1982-2000. The quote makes a reference to his experiences during the Depression. While politicians, handily out of office, compare 2007-2009 period to the Great Depression in fact it was over in two years and did not erase 90% of the DJIA value. His quote suggests that near no investors today have experienced an extended downturn like 1929-1948 or 1973-1982.
The markets peaked November 2021-April 2022. The ensuing sell-off lasted into the summer and fall. The bounce back since then appears to be ending now. Here are some early indicators.
166 year old Credit Suisse CS, the second largest bank in Switzerland, is out of business. CS failed despite a $54B Swiss Franc lifeline from the Swiss Central Bank. The Central Bank had to offer more billions for UBS, the largest Swiss Bank, to assume CS.
The second and third largest bank fails in U.S. history occurred just weeks apart this year, Silicon Valley and Signature Bank failed literally in a matter of weeks.
Advance Auto Parts (AAP) announced a severe drop in its cash position this week. The stock price had been falling since last November (recall top for major indexes). This week it dropped from $110 to $68. Smells like a Chapter 11 to me.
Treasury Secretary Janet Yellen says the banking system is fine. Tell that to the KRE regional bank index. Since March it has dropped from $62 to $39. Cullen Frost has lost 38 % of its value in the same period.
I was hoping crude oil would break above $72 but it has not happened, settling Thursday at $70.10. Note West Texas Intermediate Prices (Midland) will be factored into the Brent oil price.
Ten tech stocks continue to hold up the NASD and SPX. The fun will continue until those are sold.
