All bear markets...........

[drukes1234]

"You look at every bear market and they've always basically occurred because of an up-tick in inflation and an up-tick in interest rates" -Paul Tudor Jones

 

[Pabst]

Quote from drukes1234:

"You look at every bear market and they've always basically occurred because of an up-tick in inflation and an up-tick in interest rates" -Paul Tudor Jones

Not a great timing tool though. The Fed's been tightening for two years. Just the same I can't deny that in the macro the serial correlation between a rising CRB and bearish stocks has been quite high.

 

[areyoukidding?]

Nov.: Back when the Berlin Wall fell in the late "80s and the world began to open up economically, the hope was that someday the developing economies would advance into consuming economies. While this is still work in progress, it is also exciting to see how much fruit is already on the tree! We cannot remember another recovery in the postwar era when so many previously insignificant players (China, Pac Rim, India, Mexico) were such a large part of the global recovery. Perhaps rather than wringing our hands over whether the U.S. consumer is about to perish, we should be smelling the roses and relishing just how far the world has come in diversifying contributions to global economic growth. Perhaps a U.S. economic slowdown is not nearly as important for investors and businesses in a global economic recovery that is no longer so highly reliant on just U.S. growth?

We think people are currently underestimating how strong, diverse and sustainable the contemporary global economic recovery may prove to be. Not only are parts of the world currently exhibiting strong economic growth which will likely persist next year (China), but other parts (Europe and Japan) appear poised to experience even faster growth in the coming year. Perhaps, at some point in this recovery, ongoing global growth will be considered a cure for a U.S. economic cough.

 

[areyoukidding?]

classic weekend thread.

 

[nononsense]

Quote from areyoukidding?:

... Not only are parts of the world currently exhibiting strong economic growth which will likely persist next year (China), but other parts (Europe and Japan) appear poised to experience even faster growth in the coming year. ...

Yeah, they all come and tank at the same gas station as me.

 

[areyoukidding?]

Quote from areyoukidding?:

Nov.: Back when the Berlin Wall fell in the late "80s and the world began to open up economically, the hope was that someday the developing economies would advance into consuming economies. While this is still work in progress, it is also exciting to see how much fruit is already on the tree! We cannot remember another recovery in the postwar era when so many previously insignificant players (China, Pac Rim, India, Mexico) were such a large part of the global recovery. Perhaps rather than wringing our hands over whether the U.S. consumer is about to perish, we should be smelling the roses and relishing just how far the world has come in diversifying contributions to global economic growth. Perhaps a U.S. economic slowdown is not nearly as important for investors and businesses in a global economic recovery that is no longer so highly reliant on just U.S. growth?

We think people are currently underestimating how strong, diverse and sustainable the contemporary global economic recovery may prove to be. Not only are parts of the world currently exhibiting strong economic growth which will likely persist next year (China), but other parts (Europe and Japan) appear poised to experience even faster growth in the coming year. Perhaps, at some point in this recovery, ongoing global growth will be considered a cure for a U.S. economic cough.

this needs to be stressed.

 

[murray t turtle]

Quote from drukes1234:

"You look at every bear market and they've always basically occurred because of an up-tick in inflation and an up-tick in interest rates" -Paul Tudor Jones

===============
Thanks;
Yes as Pabst said it seems to be a rather lengthy series of interest rate''upticks'' to matter.

Better early than late on those warnings;
executions are another subject.

 

[chewbacca]

http://www.dailyspeculations.com/bear/bearcorner.htm

Word from the Bearish Camp, via Derek Gard

Despite the "1.5 million %" return of the market over the course of a century, we must accept that not everyone's investing lifetime is 100 years long. I know mine certainly is not, so arguing for the 100 year return may be a bit of a stretch for most of us.

The reality is, during those 100 years, there are many long stretches where the market does not offer a positive return. As such, one must be mindful of when to put money into the market.

I recently received the following data to illustrate this point:
Period DJIA Return # Years
AUG 1886 to NOV 1903 -16% 17
SEP 1899 to JUL 1932 -27% 33
JAN 1906 to AUG 1921 -15% 15
NOV 1919 to APR 1942 -22% 23
SEP 1929 to JAN 1950 -50% 21
AUG 1959 to DEC 1974 -17% 15
FEB 1966 to AUG 1982 -23% 16

Since 1903, there have been 26 different years where at some point that year the DJIA was lower than at some point 15 or more years earlier. In other words, 25% of the total number of years falls into this category. If you are an investor who believes 10% returns are a right, then I am afraid you will be disappointed. For many people, 15 years is a bulk of their investing lifetimes. You must make the most of those years, and it is possible stocks are not the place to put your money.

The Chair comments:

Many who write us point out such things as "There have been 26 years where at some point that year the DJIA was lower than at some point 15 or more years earlier." But these are guaranteed to happen with a series that has a 10% a year mean and a 20% annual range between high and low.

For those not privy to simulation software, or who don't like throwing a coin 100 times to simulate one year with a head coming up 6/10 of the time, and the tally during the year corresponding to the highs and lows et al., and repeating this once for each year of the 20th century , and then coming up with comparable statistics to see the accord with randomness, consider the following:

You have so many ways of coming up with a decline here because each time you go back "15 or more years," so you have like an average of 50 shots to find a decline, and then you have during the year, 250 prices to compare with those 50 shots, so 12,500 times to come up with that one beautiful decline each year. Is it any wonder that with 12,500 comparisons to make each year, you can come up with a 25% chance that one of them gives you the bingo?

What kind of mind uses this specious kind of reasoning to carry its flimflam points? And how much better could such minds have been occupied than by trying to find the needle in the haystack that supports their current bearish position, or doomsday service?

The deception of the DJIA comparison is exacerbated by the fact that dividends in the last 100 years accounted for some one-half of the total return for stocks. When you look at the DJIA itself, you're parceling out half of the returns, thereby leaving you with a 5% annual drift with a 20% average annual range, making the comparison even more biased and guaranteed to support the seeming point that it's possible to be down even while it's up.

Attempting to answer my question abut the kind of mind that comes up with this, one notes that the incentive to profit from a doomsday scenario is very great because people will always pay more for doomsday than optimism. It seems more cynical and restrained. But I would put it more to the kind of leveling that these people want to see--- a society with no one standing out from any other, where secondhand distributors of information are king, where anyone's insecurities are overcome by a view that no one will have what everyone else doesn't have, i.e., an "agrarian reform."

What is V.N. talking about anyone care to decode?

 

[chewbacca]

More from V.N.'s site:

Reasons to Be Bearish: Plus Ça Change, from Steve Ellison

One of my prized possessions is a chart of stock market returns in Venita Van Caspel's book "The Power of Money Dynamics." Each year is annotated with a reason to have been bearish that year:
1934: Depression
1935: Civil war in Spain
1936: Economy still struggling
1937: Recession
1938: War clouds gather
1939: War in Europe
1940: France falls
1941: Pearl Harbor
1942: Wartime price controls
1943: Industry mobilizes
1944: Consumer goods shortages
1945: Post-war recession predicted
1946: Dow tops 200 - market "too high"
1947: Cold war begins
1948: Berlin blockade
1949: Russia explodes A-bomb
1950: Korean war
1951: Excess profits tax
1952: U.S. seizes steel mills
1953: Russia explodes H-bomb
1954: Dow tops 300 - market "too high"
1955: Eisenhower illness
1956: Suez crisis
1957: Russia launches Sputnik
1958: Recession
1959: Castro seizes power in Cuba
1960: Russians down U-2 plane
1961: Berlin Wall erected
1962: Cuban missile crisis
1963: Kennedy assassinated
1964: Gulf of Tonkin
1965: Civil rights marches
1966: Vietnam war escalates
1967: Newark race riots
1968: USS Pueblo seized
1969: Money tightens; market falls
1970: Cambodia invaded; war spreads
1971: Wage-price freeze
1972: Largest U.S. trade deficit in history
1973: Energy crisis
1974: Steepest market drop in four decades
1975: Clouded economic prospects
1976: Economic recover slows
1977: Market slumps
1978: Interest rates rise
1979: Oil prices skyrocket
1980: Interest rates at all-time highs
1981: Steep recession begins

(Van Caspel, 1983, pp. 124-125)

Unfortunately, I have the 1983 edition, so the chart ends there.

A modest attempt to bring the record up to date:

1982: Double-digit unemployment
1983: Record budget deficit
1984: Technology new issues bubble bursts
1985: Dollar too strong
1986: Dow at 1800 - "too high"
1987: Stock market crash
1988: Worst drought in 50 years
1989: Savings & loan scandal
1990: Iraq invades Kuwait
1991: Recession
1992: Record budget deficit
1993: Clinton health care plan
1994: Rising interest rates
1995: Dollar at historic lows
1996: Greenspan "irrational exuberance" speech
1997: Asian markets collapse
1998: Long Term Capital collapses
1999: Y2K problem
2000: Dot-com stocks plunge
2001: Terrorist attacks
2002: Corporate scandals
2003: Gulf War II
2004: High oil prices
2005: Trade deficit

 

[drsteph]

Quote from areyoukidding?:

Nov.: Back when the Berlin Wall fell in the late "80s and the world began to open up economically, the hope was that someday the developing economies would advance into consuming economies. While this is still work in progress, it is also exciting to see how much fruit is already on the tree! We cannot remember another recovery in the postwar era when so many previously insignificant players (China, Pac Rim, India, Mexico) were such a large part of the global recovery. Perhaps rather than wringing our hands over whether the U.S. consumer is about to perish, we should be smelling the roses and relishing just how far the world has come in diversifying contributions to global economic growth. Perhaps a U.S. economic slowdown is not nearly as important for investors and businesses in a global economic recovery that is no longer so highly reliant on just U.S. growth?

We think people are currently underestimating how strong, diverse and sustainable the contemporary global economic recovery may prove to be. Not only are parts of the world currently exhibiting strong economic growth which will likely persist next year (China), but other parts (Europe and Japan) appear poised to experience even faster growth in the coming year. Perhaps, at some point in this recovery, ongoing global growth will be considered a cure for a U.S. economic cough.

I wholeheartedly agree with this statement.

While I'm tempted to be a bit of a permabear, I know factually that the likelihood of continued investment growth is reasonable. This is particularly considering 1) global expansion of world markets through new consumers entering via the development of the emerging markets, 2) targeted inflation built into the system and 3) the herd mentality of the boomers who will still continue pouring money into mutual funds for a while.

Yes, if you bought the NAS at 5000 in Y2K, you're going to be waiting a long time for it to come back. There's one of those long periods of negativity that you can back calculate. But if you bought in either 1999 or at the end of 2000, you bought at about 2500. Now, the waiting period to come back to profitability isn't as bad (given the self-inflating nature of the markets).

You earn your income in the country in which you live. (For me, that's the US). But you invest in those opportunities which are most likely to give you the appropriate combination of investment return and investment safety. For me, that's international equities (for the capture of the equity appreciation, and the FX benefits), US companies which are doing business with china (wal mart, etc...) and US value investment outside of the manufacturing sector. So basically, I'm hedged. If US does well, I make money (my income). If US does poorly, I make money (from investments). If the world falls apart, there's not much I can do about it, so I am not going to take that possibility seriously.