Thanks for the bull/bear correction. My fingers were faster than my brain!
My observation is that most bear markets have several phases in which they go down a lot, recover a little and go down more. I don't think there is any typical number of phases. The trick is to see the bottom, except in hindsight.
The best thing I have found, and it is surely not infallible, is to watch the charts for channels. All of the stocks I follow have switched from up channels to down channels in the last 30 days. I have been 95% cash for most of the last month. Actually, I started getting cold feet last December and started selling prematurely.
Chart the Naz for 10 years and estimate the long term trend. I have not done that yet, I plan to do it this weekend. It is probably about 20% per year. My guess is that the market will tend to go back to about the long term trend line, and that is a lot lower than where we are now.
We all know that a "rising tide raises all boats", but we forget the corollary that an ebb tide takes everything down with it, even stocks that don't deserve a haircut. That is just the way it is.
I may be wrong, but I think patience will make us a lot of money in the coming months. How many investors today knew were in high school in 1987, the last time we had a real big blow-off. And then it took two years for most stocks to recover. Also, the Fed rushed in and added liquidity and raised margins to help the market. Today the Fed is pushing down, not pulling up. It is hard to believe that it will snap back as quickly as it has after some of these minor dips of the last couple of years. The psychology of the market has changed in the last month, IMHO.
The hardest thing for me to do is to remember not to fall in love with the stocks, but to always remember that the object of the exercise is to make money.
So much for pontificating.
JRH |
