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Strategies & Market Trends : 50% Gains Investing
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To: xstuckey who wrote (66448)10/7/2008 4:21:05 PM
From: Jurgis BekepurisRead Replies (1) of 118717
 
Bear markets usually end when the value buyers step up.

There are so many things wrong with this simple statement. :/

First, most "value buyers" have to buy during any market. Most mutual fund managers have to be invested 80-90% and they are selling now due to redemptions and not buying.

Second, Buffett is buying and yet...

Third, if you think that there are some mysterious "value buyers" who have been hoarding cash and will at some point start buying... well Dale is the only example I know. ;) Buffett is another, but he is already buying. :)

Actually, I would rather guess that bear markets usually end when there is money flow into the market. Which usually means that investors start forgetting the wounds caused by drops and start shifting money into equity funds again. This is probably doubly true for such broad-based panics like this one. In 2002-2003 at least there were safe havens or alternative investments where people could move money without exiting the market. Today there is nothing. The only way to preserve capital is to keep it in the mattress. Not even bank is necessarily safe. My guess is that getting money out of mattress and into the market is much tougher than getting it out of alternative investment (like value vs. growth, foreign stocks or even bonds). Of course, by this argument, I should be out of the market too. So hopefully, I am wrong. ;)

There is one possible "bright point" for market and that is not value investors but rather trend traders. If there are enough trend shorties who could switch long at some point, we could have a huge reversal. I would not count on this though.
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