Don, re: potential bear market in the longer term: i have no idea about the time-frame (you mention within five years, which sounds plausible), but i am very certain as to what's going to happen. the pattern of major bear markets after extended bull markets is remarkably similar in the known historical examples. after a final blow-off a sharp retreat, immediately followed by a recovery almost back to the top,but not quite. then a very pronounced sell-off for about two weeks which culminates in a 1-3 day long crash. after that a 'sucker's rally' starts which recovers between one to two thirds of the decline. from there, prices start to decline again until they reach the lows established earlier. at this point, if all the major indices confirm each other by breaking the prior low and no technical divergences can be discerned, you know the great bear has come. the very least one can expect at that point is a 40-50% decline from the top before a new bull market can begin. if the decline is contained at minus 50% ,the new bull market will recover the lost ground relatively quickly. if the decline is 60-90%, no new highs may be seen from anywhere between one to three decades(there are exceptions). just as a generation can get used to a seemingly permanent bull market, the next generation may have to live with a bear market that has the occasional sharp rally thrown in. buy-and-hold, the most touted strategy of our time, will be utterly discredited, as it will not work anymore for a long time. one day, such a devastating bear market will come. but i neither believe that anyone can predict when exactly it will happen, nor at what level the market will see it's 'final' top. maybe it'll be dow 40,000, after all the dow and the nikkei were at more or less the same level in 1969 (approx. 1000). i don't know, nobody really does. just had to mention this little fact,to relieve the gloom.
regards,
hb |
