We’ve always liked Richard Russell, the author of the Dow Theory Letters, the way we like that drunk old man down at our local watering hole. They’re both always full of bad news, telling us we’re wasting our money, not saving enough and generally headed for trouble. We try to ignore them but somewhere deep down we know they’re right.
Today Peter Brimelow pens a birthday card to Russell, who turns 82 on Saturday. He quotes a particularly "wise old man at the end of the bar" bit from a recent Russell piece.
The big picture that Russell has been writing about for several years is the move back to 1970s style-stagflation. As he put it Wednesday:
"I'm afraid that we're very close to major trouble in the stock market. ... If you can't understand the basic deflationary background of the current situation, I don't think you can understand what's occurring. In my opinion, at this point, if nations don't inflate enough -- they'll find themselves giving in to the forces of deflation. The massive debt position in the US is basically deflationary. All this debt must be serviced, and as rates rise, it takes an increasing amount of money to service the debt. ... I'll be most interested to hear whether Bernanke in his session with Congress indicates that he may boost rates again. Raising rates would be a mistake in the face of the weak real estate market and the problems of the cash-strapped consumers."
Many happy returns for Richard Russell [Market Watch]