Quote of the Day

Amusing persective from longtime market observer Richard Russell:

Russell suspicion (of course, I could be wrong):

"Greenspan continues raising Fed Funds until the housing bubble is close (close
but not there yet) to toppling over. Greenspan leaves office in January. A month
later the stock market keels over. The housing market buckles and consumers cut
WAY back on their spending. A severe recession begins. Greenspan is gone, and
the word is, ‘Lordy, Lordy, if we only had Greenspan back, this wouldn’t be
happening . . . Greenspan, Greenspan, why did you forsake

This is my favorite type of prediction: an offbeat amusing statement that simply rings true. Your mind’s eye can see the entire forecast unfold like a movie.


Happy 81st birthday, Richard Russell!
Peter Brimelow
MarketWatch, 10:23 AM ET July 22, 2005   

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What's been said:

Discussions found on the web:
  1. Lord commented on Jul 25

    This is why Greenspan should retire. Then when future problems arise we can dust him off to restore confidence.
    If we wait until he is dead, it becomes a little less convincing.

  2. gary lammert commented on Jul 25

    Mr. Russell and Mr. Granville sense the legacy of the current Federal Reserve Chairman.
    The world macroeconomy finds itself in a situation in which there is no (good) way out. A terminal and final perfect fractal sequence has a high probability of occurrence this trading week confined within the limits of a 22/54/54 maximum weekly growth fractal sequence. Many of the world’s equity indices’ fractal patterns are following the identical or very slightly different variations of the Wilshire 5000. They are synchronized for a final lower order daily fractal top on or near Thursday 28 July 2005 to complete a final x/2.5x/2x daily fractal growth sequence. This daily sequence is contained within the potential terminal 103 daily growth fractal sequence of the last 50 week fractal sequence beginning in August 2004. The ideal final daily growth fractal pattern of 12/30/24 would represent the third and terminal portion of a 51- 52/129-130/ x to 2x or 64 final day sequence.

    Watch for a key reversal exhaustion gap day which is anticipated within the next ten trading days, ideally occurring on July 28 2005. In an ideal fractal sequence the Wilshire 5000, representing over 95 percent of US collective equity worth, should gap to a new multiyear high ending on the low of the day but above the exhaustion gap. If it gaps but does not end on or near the low of the day, further lateral movement up to a maximum of x/2.5x/2.5x or 12/30-31/30-1 days is possible.

    Since August 2004 which the began third and final weekly growth fractal the Wilshire and the major European indices are all following similar daily terminal growth patterns. The first two daily growth fractal sequences followed a 51-52/129-130 day (x /2.5x) pattern with a very characteristic nonlinear trading gap drop near the end of the second fractal. Since the finish of their second fractals, the indices have begun their third and final fractal sequence with nearly identical 12/30-31/19-21 of an ideal 24 day pattern.

    The German DAX like the the US real estate indices typified by IYR and the US housing construction industries by $HGX Is showing classical blow-off characteristics. For those doubting the validity of fractal analysis, a look at $HGX is very instructive. The daily fractal count of $HGX, a leading index in the US housing bubble economy, is exactly 12/30/20 of a probable 24 days. This fractal evolution is most elegant in its classical illustration of a perfect x/2.5x/2x growth fractal evolution.

    Importantly for timing purposes the Chinese stock market is following a 7/17/10 of 14 day growth pattern that places a perfect fractal apogee contemporarily with the US and European indices on potentially the 28th of July 2005. Two very different numerical x/2.5x/2x patterns arriving at the same apogee suggest strong confirmation of a major global market peak.

    The dollar index is following a growth pattern of 28-29/66 or 67 of 70-71. Remembering that the end of second growth fractals are herald by nonlinear decay, expect a gap to the low side in the next 3-4 trading days to a range of 86.25 or lower for the dollar index. The Swiss Franc has an identical inverted growth of decay pattern with an anticipated reciprocal rise in 3-4 trading days. Gold will follow the the Swiss Franc’s rise.

    The business news media will likely highlight and interpret the coming dollar index fall over the next few days as an ‘obvious’ sign of favorable Yuan currency readjustment. The natural occurring and expected fractal fall in the US dollar index will be interpreted as a healthy indicator for improvement in future US exports – exports something other than empty trans-pacific metal containers and circa ‘US civil war’ greenbacks – to be sold in the Chinese economy. Extrapolating beyond the data, commentators will remark that this may be the turning point of the US current account deficit. The high probability fractal sudden (and final) rise of Chinese, US, and European equities over the next 4-10 days will be misinterpreted as the international markets’ response to the revalued Chinese Yuan, which at present has been lowered only a miniscule percentage.

    In reality there is no way out of the economic difficulties the US and the leading economic countries find themselves in. Once America gave up its protectionism for American manufacturing jobs by the embracement of NAFTA, the horse was out of the barn, running further and faster away each day, never to return. Foreign factories have been built, many times with the aid of American corporations seeking higher profits from the low cost labor and absence of ubiquitous lawyers and liability laws; foreign companies have undergone organizational and export savvy maturation and sophistication, and processes for automatic and efficient foreign governmental exchange of domestic currency for export gained dollars has likewise matured. Exchanged dollars have only one or two market places available for foreign government investment. Foreign government owned dollars are invested in either the US federal debt markets or in the oil and raw material commodity markets to secure both present and future purchases. These limited investment areas and the absence of significant wage related add on cost to finished foreign products have provided an extended illusion that all was well with the global economy which had a ‘glut of savings’.

    Economic realists recognize that this unbalanced arrangement can not last. America can not in perpetuity borrow and consume. Items produced by American labor with the added cost of transport and the American tort system can not compete with the low cost of Chinese domestically produced items. Reevaluation of the Yuan will eventually lead to inflationary prices of Chinese products sold in American markets putting more pressure on the cash strapped debt ridden saving-less American consumer. Congressmen and Senators threatening import tariffs to protect American manufacturers do not have a grasp of the dilemma at hand for the US economy and the debt ridden wage earner. 15 years ago before NAFTA, tariffs would have protected American manufacturing jobs and domestic commerce. Much more US federal debt would have been owned by Americans. Because of the smaller profit margins and less money supporting the debt market, interest rates would have been higher, keeping housing valuations more in line with traditional or slightly higher than average long term interest rates and ongoing wages. The debt-interest rate-wage-asset overvaluation dynamics would have not been nearly so seriously askew. At this point in history with interest rates ‘artificially’ kept down by the great economic aberration that characterizes the Chinese-US temporary symbiosis, rapid transitional shifts that are characterized by the nonlinear collapses of second growth fractals become relevant.

    Macroeconomic imbalances have always been and will be self correcting. The various and integrative total of asset valuation curves tell the composite macroeconomic story each day and each week. Asset valuations grow and decay, evolving by discrete fractal units that represent an instantaneous integration of the underlying money supply as applied to all available assets. Today’s stressed macroeconomic dynamics of countervailing forces have been brewing and beginning to swirl like a tropical storm near the beginnings of hurricane alley. The inevitable inflationary pressures of the revaluation of the Yuan and/or the possibility of import tariffs are being produced by the irritation and angst of massive and ongoing continued loss of American manufacturing jobs. The huge and escalating current account deficits that are required to grow and to support ever growing US debt and to maintain low long term interest rates will be diminished by the inflationary pressure of a valuating Yuan, import tariffs and dollar diversification into other currencies.

    The Chinese have recently discovered that having US dollars does not necessarily assure purchasing power and acquisition of US assets and oil companies even at a premium over other bids. They now understand the utility of currency diversification. Global imbalances will self correct and self correct in an optimal fractal manner. There is no (good) way out. Gary Lammert http://www.economicfractalist.com/

  3. Joe Loserman commented on Jul 25

    Hey Barry,

    I’m a novice when it comes to economics. So forgive me if the answer to this is obvious. You said sometime ago in an interview that you predicted an inverted bond yield curve and that like in the past, we’ll have a rally followed by a bear market in 2006.

    Given that long term interest rates are now also rising, do you still feel that way?



  4. John Goodall commented on Jul 26

    Hi Barry,

    It seems that you more or less agree with this Fed/Market scenario playing out. I enjoy reading your predictions and I know you don’t claim to “know” the future, however I am always struck at the wild differences of market forecasts that come from financial gurus. Below is a link from one such guru (Donald H. Rowe) who sees the Fed/Market scenario playing out in a super-bullish fashion. It would be interesting to hear why you think such reasoning is wrong, and what holes can be poked in his scenario. Striclty logical nothing personal. I enjoy reading your forecasts and you seem to be correct quite often. To an amateur like myself Donald’s scenario sounds rather plausible as well. So where are the holes?


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