Thank you for the opportunity to discuss something other than Dent. Initially I wanted to discuss how to deal with secular bear markets. Dent's ideas were peripheral and included only because they implied a secular bear might be looming.
But the ltb&h doesnt have to make any decisions, whether approached by the bull or bear, and is perfect for the average investor.
...
over a very long time, we are always in a bull market.
The problem is "over the very long time", we're dead. As I stated in an earlier post, it's fine to "ride out" a bear correction, if you have good reason to believe that your investments will "come back". OTOH what's the point in holding in a secular bear market if they're never (or not in your lifetime) going to "come back".
To better appreciate what I'm talking about consider
geocities.com
[Now there is a problem with this link. It may have to do with Yahoo trying to get more funds. I don't know. There is a "work around". On a windows machine with IE, click on the IE icon to bring up a completely new IE window (not the one brought up by clicking on the link). Copy and paste the link into the IE address bar of the new window and hit return. This approach works for me and there may be analogous techniques for Mac and Netscape users.]
If successful, you should see a semi-log chart of an Inflation Adjusted (pseudo) DJIA for the period 1800 to 2000. The first thing to note is the upward bias of the blue line in the graph depicting the very long term bullish trend - of which MB is rightly fond. The second item to note is the fluctuations in the line - it's far from straight. Pay particular attention to the time scale on the horizontal axis. The following I obtained from "eyeballing" the chart for the most recent and relevant century.
Years spent in a sideways/downtrend Years spent in a uptrend
1900 - 1920 1920 - 1930
1930 - 1948 1948 - 1966
1966 - 1982 1982 - 2000
These numbers are disquieting. Even though the century's trend is up, less time is spent in an uptrend than otherwise. Moreover, assuming that we are still in a secular bull uptrend (and I do), it's already the longest one of the past century. In the first column of numbers, at everyone of the second dates, the market was significantly lower than at the first date. To get back to anywhere near the earlier peak required considerably more time. Given the length of a human lifespan, the amount of time lost (decades) in a secular bear market is simply to long. If history is any guide, few companies survive a secular bear market. Thus, the time to recoup becomes infinite.
Whether or not one believes Dent's arguments isn't of primary importance. What is important is that secular bears have always followed secular bulls. Unless you believe a profound, fundamental economic metamorphosis has occurred, the current (long in the tooth) secular bull will also be followed by a secular bear. All I'm saying - is shouldn't we prepare? And if so how does a ltb&h type best do that?
lurqer |
