On Staying Solvent - By Richard Rusell (19/1/11) PDF Print E-mail
Richard Rusell   
Wednesday, 19 January 2011 10:33

Dow Theory Letters

[FF Editorial: The article is plain common sense and we couldn’t agree more. It also reflects our current thinking. Why anyone would want to stay in the market, when one major whack in the stock market would wipe out all gains is beyond us. There are always suckers. We hope you are not one of them]  

“Perhaps Lord Keynes’ wisest admonition was when he said, “The market can stay irrational longer than you can stay solvent.”

Let’s take the current situation. The dollar is under attack, housing is still sick. unemployment remains a chronic problem, stocks are rising on a sea of liquidity. Iran and North Korea both have nuclear capabilities and are both “wildly unstable.” With this background, a stock market that is rising might easily be termed “irrational.”

I’m not the only analyst who considers a rising market in this area as “irrational.” My strategy, in view of what I just wrote, is to stay solvent. What’s my strategy for remaining solvent? Easy, I feel more comfortable out of the stock market and on the sidelines. I’m not saying that the stock market isn’t going higher. My PTI and my Lowry’s studies say that it is. But this stock market advance is a “pitch” that I’m not going to swing on. The bull market in gold is enough for me. I can sleep with my gold and silver positions. And frankly, I couldn’t sleep with a large position in the stock market. The reason — this market is too “irrational” for me. And I don’t say it’s irrational because of outside news events. I’m not saying that it’s just the unsolved housing mess that bothers me. No, it’s the fact that the dividend yield on the S&P is a micro 1.86%.

Buying a selection of stocks when the dividend yield is flashing “danger” is not my cup of tea. I’ve been around too long to feel that I have to be in the market every time it advances.. There’ll be other opportunities; the market is always there. I’ll enter the stock market when I like the “pitch.” In baseball, it’s three strikes and you’re out. In the stock market, one incorrect swing of the bat, and you can take a bath that will set you back financially for years — if not for life.”



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Blair 'Misled MPs On Legality Of War' Law Chief Who Advised Ex-PM Tells Iraq Inquiry - By Tim Shipman and Ian Drury (19/1/11) PDF Print E-mail
Tim Shipman and Ian Drury   
Wednesday, 19 January 2011 10:30

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Tunisia: How The US Got It Wrong - The Events In Tunisia Again Show How US Foreign Policy In The Middle East Fails To Fully Understand The Region - By Mark LeVine (19/1/11) PDF Print E-mail
Mark LeVine   
Wednesday, 19 January 2011 10:27

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The Arab Spring Of Democracy - By Abdul Ilah Albayaty, Hana Al Bayaty and Ian Douglas (19/1/11) PDF Print E-mail
Abdul Ilah Albayaty, Hana Al Bayaty and Ian Douglas   
Wednesday, 19 January 2011 10:22

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I Warned That Banks Will Soon Be Forced To Walk Away From Homes… Guess What! - By Reggie Middleton (18/1/11) PDF Print E-mail
Reggie Middleton   
Tuesday, 18 January 2011 10:19

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