Hello all,
Sorry for my recent silence on the greater picture issues.
This is the 1st time in weeks I have the time and mental resources to contemplate, digest and post, and there's a lot that is still half baked.
I Just read the introduction to this thread again and it looks contemporary, so we might as well keep the tread alive rather then open a new one.
This is long and goes from lighter subjects to heavier ones.
1. The smarter you are, the longer it takes
I cannot phrase it better then Tommaso
Message 16377212
2. Stock Prices
S&P returned to October 1998 levels. Is this high or low?
Well I guess most of the regulars here accept the assumption that in 2000 not only the techs but the entire stock market was in a bubble state and had bubble (read: unrealistic, euphoric) valuations.
A 30% plunge in S&P prices is not enough to bring us even close to the norm.
Remember that P/E is useless when E goes to zero and below, so this ratio is not a very good gauge when looking into a future that harbors a probable depression.
Greenspan's irrational exuberance warning came in december 1996. S&P was where? 600? 700? and what about some overshoot below the historic norms?
3. The Anatomy of the Bear
Bear market rallies are not the mirror image of bull market corrections. The market is not symmetrical. The sawtooth pattern in a bull market (up legs over 70% of the time, but down legs rate of decline sharper then average rate of advances) do not work backwards in a bear market.
A bear rally is around the corner (all TA indicators at extreme lavels, plus here's the top subject on the hot list Subject 51736
But the bear is far from over.
You wanna see how a real bear market looks like?
chart.yahoo.com
The Nikkei 225 index plunged recently to a 20 something years low, after over 10 years of bear.
the-privateer.com
Gold was in a bear market for the last 20 years. When looking at the chart you must subtract at least inflation over the years (Gold doesn't pay much interest).
4. Calling the Bottom
If there is a depression around the corner (and I haven't changed my mind about that) then at the later stages of the bear market the surviving companies' stocks will be measured by the strictest of measures (stripped to the bone NAV?). The same rules that applied to calling the secular bull top (it can always go higher) should be used in reverse to calling the bottom.
Quite a few posters on this thread, myself included, tried to call tops to the bull since 1997. Hey, now I remember Pretcher called THE top in late 1994.
Remember how futile our efforts were. It's going to be the same thing backwards.
The one technical indicator I have found that called the demise of the bull in great accuracy (although in hindsight - it is a lagging indicator after all) was the 52 weeks (~200 days) MA. It turned down in september 2000 for the first time since 1994. The 13 weeks MA crossed it downwards on the SAME WEEK. That was a powerful sign.
A winning strategy for a LT investor (in hindsight, of course) was to remain invested throughout all corrections and panics (even use them) and bail out with most of his or hers gains and go defensive when the 52 weeks MA + crossover rang.
Will this work for The Bottom as well?
The answer to that needs more work but intuitively I think not. Bear markets, having the nature of a correction (be it even for a 69 years bull leg) are more irregular then bull markets. Also the bottoming out action itself could take years (see Gold again).
The best sign IMO for a bottoming out action will be Volume. All exuberance, not just the irrational one, would be gone before the bottom is reached. When the market starts a serious climb after a very long time of very low volume sideways Brownian motion then its time to call The Bottom in hindsight.
5. Why this bear could be even bigger then I thought
a. Because only in hindsight we can appreciate the mind boggling size of the bubble. Bigger then any historical precedence, and spread throughout the western world.
b. Because the post bubble effects on the Tokyo SE are still rolling, sending the Nikkei lower and lower.
c. Because only after the suicide terrorist attack on WTC I began to grasp the shift of focus in the world, the real meaning of Globalism and anti Globalism and collision of values between them. Those are the half baked ideas I should leave for another post, but just to hint at what I'm trying to round up- the 1000 years war between Christianity and Islam, the lack of a separate word for values (the other ones) in English, Microsoft as example for US international relationships, Intellectual property laws. This is big and philosophical and I hope I'll get the time to post it soon.
ATG |
