Richard Russell to investors: get liquid before the crash

newspaper stock market section, with pennies

Market forecaster Richard Russell is advising investors to get out of stocks and into gold and cash as all signs point to a major crash. Flickr photo.

Richard Russell has made a name for himself as a fortune teller for investors seeking to stay a step ahead of the stock market. In his latest Dow Theory Letter prediction Tuesday, Russell forecasts a disastrous stock market crash that will render America unrecognizable by the end of 2010. Some other pundits who try to divine future events by analyzing and comparing stock market trends are also forecasting a crash.

Richard Russell’s Dow Theory Letters

Richard Russell’s Dow Theory Letters have gained a huge following in financial circles for the author’s comments, observations and stock market philosophy. Russell covers the U.S. stock market, foreign markets, bonds, precious metals, commodities, politics and economics. In the latest Dow Theory Letter, Business Insider reports that Russell advises investors to get out of the stock market altogether, avoid fast cash loans, eliminate debt and convert all wealth into liquid assets:

Do your friends a favor. Tell them to “batten down the hatches” because there’s a HARD RAIN coming. Tell them to get out of debt  and sell anything they can sell (and don’t need) in order to get liquid. Tell them that Richard Russell says that by the end of this year they won’t recognize the country. They’ll retort, “How the dickens does Russell know — who told him?” Tell them the stock market told him.

Global Macro Investor agrees

Richard Russell has a kindred spirit in Raoul Pal — although Pal thinks the stock market apocalypse will happen in a matter of days or weeks, instead of months. Pal is a former Goldman Sachs executive who authors the Global Macro Investor, a independent research publication. Pal claims to have been observing a classic stock market pattern that has resulted in historical financial disasters — a sharp decline followed by a failed rally followed by a collapse.

Dow Theory forecasts

Richard Russell’s Dow Theory forecasts call attention to a deterioration in the stock market since April, despite improving business news. Russell offers a narrative that supports the Global Macro Investor prediction, pointing out recent April highs in the Dow and S&P Averages, followed by a plunge in both Averages to May 7 lows, followed by a short rally. If the two Averages turn down again to fall below their May 7 lows, the Dow Theory forecast is that a market collapse is inevitable, based on historic data.

Stock market crash unavoidable?

The Dow Jones Industrial Average fell 6.9 percent during the four days that ended May 7, sinking to 10,380.43, the lowest level since Feb. 26. The San Francisco Chronicle reports that the transportation gauge closed at 4,298.12, down 11 percent in four days. Downgrades of Greece, Spain and Portugal helped trigger the decline as the prospect of a sovereign default in Europe undermined investor confidence.

Russell speaks, market listens

Richard Russell’s Dow Theory Letter is taken quite seriously by investors. Chances are his prediction of a stock market crash will encourage a stock market sell-off and a run on cash and gold. Russell claims to have been the first to recommend gold stocks in 1960. Russell says he called the top of the 1949-66 bull market, the bottom of the great 1972-74 bear market and the beginning of the great bull market that started in December 1974. Russell began publishing Dow Theory Letters in 1958. Dow Theory Letters is the longest-running investor newsletter continuously written by one person in the financial industry.

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