May has been a cruel month for Wall Street with the flash crash the other week and stocks continuing to slide, hitting its lowest level for the year.
CNN Money poses the obvious question: is this the beginning of the real bear market?
So far, analysts and commentators are all over the place on this with some saying stocks have probably hit bottom which means they can only go up while others say the big imponderable is Europe. No one knows for sure what will happen there.
The Daily Telegraph says that the European meltdown fuses with the crisis in Asia as North Korea's cuts all ties with the South and abrogates its non-aggression pact and as Thailand sends tanks into Bangkok to crush the Red Shirts. This is a real worry because while Europe crumbles and America struggles, Asia is the place that's holding the world economy together. If that goes, it's all over. That in turn coincides with fears of a second leg to the US housing slump as US house prices fall and we witness the slow-burn effect of rising delinquencies. All this must have an impact on Wall Street.
That's why Richard Russell, author of the famous Dow Theory Letters is now warning, as reported here, to get out of stocks now. It's an order to sell.
Russell writes: "Finally, it's happening. The stock market has 'lost its mind.' The poor thing is falling apart, when every sane investor knows that the market "should be" going up as it discounts the almost certain better economy that lies ahead. Then I remember that the stock market reflects what everybody knows about everything and anything that pertains to business and the forthcoming economy. So alas, the stock market has finally gone insane. It's not telling us what we already know."
Russell's advice: get out of stocks and get into cash and gold.
Now the official line is that the US is recovering and that there won't be a double dip recession. Russell begs to differ. ""I trust the stock market more. If I read the stock market correctly, it's telling me that there is a surprise ahead. And that surprise will be a reversal to the downside for the economy, plus a collection of other troubles ahead."
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