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Only investing during major crashes/bear markets
- Thread starter Cutten
- Start date
Quote from Runningbear:
Cutten,
I read some research that showed the Australian equity market had only had two consecutive down years in a row twice since the great depression.
During the asian crisis the Aussie market pulled back about 500 points from a high of about 2850 and has basically gone straight up since.
So if you get a 20% pullback and a down year, buy high yeild stocks with as much leverage as you can get your hands on.
Why? What makes you think that at some point in future it might not decline 20%, and then keep going?
Quote from maxpi:
Ben Stein wrote a book wherein he proposed buying only when the indexes were below their 200 week averages. It has been a while since I read it but he made the case. That might get it for you.
Many markets have gone below their 200 week averages, and then proceeded to suffer massive losses from there. A moving average simply tells you what the average price for the last 200 days is - it doesn't tell you whether today's price is at a deep discount to likely value; it doesn't tell you if there is the potential for massive price appreciation in the next year or more; it doesn't tell you that risk is limited.
Quote from Cutten:
Many markets have gone below their 200 week averages, and then proceeded to suffer massive losses from there. A moving average simply tells you what the average price for the last 200 days is - it doesn't tell you whether today's price is at a deep discount to likely value; it doesn't tell you if there is the potential for massive price appreciation in the next year or more; it doesn't tell you that risk is limited.
Stein talked about averging down in quality companies and also he was not talking about starting to buy right when the prices crossed the average. It was not a tech analysis book at all but he made a good historical case for it working based on USA companies. I'm thinking that "indexes below the 200 week ma" would begin to get things on your radar and you could study to find the time to enter the markets based on the business cycle or knowledge of the various industries involved or TA.
Personally I think that 200 week average is tuned more to the business cycle than most TA. Stein's ideas would just get you started buying somewhere in the low period of the cycle.