- Joined
- 4 February 2006
- Posts
- 564
- Reactions
- 0
a helicopter view:
Carl Swenlin | DecisionPoint
CHANGING WITH THE MARKET
When the market changes, we must change our tactics, strategies, and analysis techniques to accommodate the new market conditions. This is not a new idea, but it is one that is not very widely recognized, particularly when applied to the long-term. In recent writings I have emphasized that we are in a bear market, and that we must play by bear market rules. Overbought conditions will usually signal a price tops, and oversold conditions can often see prices slip lower to even more oversold conditions. When making these comments, my focus has been on the cyclical bull and bear markets. What I want to address in this article are the secular forces of which we must be aware.
On the chart below I have identified the five secular trends that have occurred in the last 80-plus years. First is the 1929-1932 Bear Market, which, although it was short, saw the market decline 90%. Next was a secular bull market that lasted from 1932 to 1966, which overlaps with the consolidation of the 1960s an 1970s. In the early 1980s another secular bull market began which peaked in 2000 (basis the S&P 500). Finally, we seem to have entered another consolidation phase that could last another 10 to 15 years.
I began my market studies in the early 1980s, before the big bull market took off, and I learned from the guys who learned all they knew from the market action of the 1960s and 1970s. Applying those rules to the new bull market was confusing, frustrating, and unprofitable. While I didn't participate in those markets, it is easy to imagine the bewilderment of those who, educated in the bull market of the 1920s, took the elevator all the way down to the basement starting in 1929.
The long bull market after the 1932 bottom was missed by most of those traumatized by the crash, but it trained a whole new group of analysts who learned that the market always goes up . . . until everything they knew was proven wrong by a 20-year consolidation. Finally, the battle cry of the 1980s and 1990s bull, "this time it's different," was learned well by those who ultimately ate the 50% decline of 2000-2002.
Unfortunately, it takes time to unlearn the lessons of the heady 1980s and 1990s, and we can still observe people using bogus valuation models that only work in bull markets. We still see people trying to pick bottoms, and we still see people who think that a stock is under valued because it is down 70%. By the time this current secular market phase is over, people will have learned all new rules, that will not apply to the next 20 years.
Whether or not I have correctly identified the current secular market phase as a consolidation remains to be seen, but I am certain that we are no longer operating on the rules of the last secular bull market.
a helicopter view:
That is a great idea, but what are the new 'rules' you speak of?
-----------------
**NEWS FLASH**
Treasurer Swan says budget to take $AU40 Billion hit from financial crisis.
-----------------
Ouch!!
and that would be his most optimistic spin he can put out atm - at least its a step back from repeating 'no problem, no problem, we won't go into recession.'
but wait for it, it will come, "oh, not our fault, all theirs, but we can't now avoid recession" followed by "it looks like it will be deeper than we thought"
Is this bloke a nutter or what?
http://www.youtube.com/watch?v=ge2J2lNusJs
Is this bloke a nutter or what?
http://www.youtube.com/watch?v=ge2J2lNusJs
Go out and wire all your money to foreign accounts. Whether it's British pounds, Swiss Francs or French Francs, but not Euros, because the Euro is not backed by anything.
How exciting!
Heard a few media "expert" commentators whispering rumours that the market might have bottomed and could signal the end of the Bear Market.
Ooooh, I love it when they get all uppity after an office sweep win on Melbourne Cup Day!
Ahhhh. The immediacy of the Modern Media. One day its' GLOOM, the next day ... BOOM!!
Any punters on how low the USD will go and when? Should be good in the cfd game.
"History doesn't repeat itself, but it does rhyme."Strange how all these boom start... Greed, Money... Boom.. Bang and no one ever learns.
Nothing repeats like History.
Before we look at how weak the economic numbers were from both the manufacturing and service sector surveys, let me cover an important point about recessions. You are going to hear all sorts of analysts (including sometimes even this humble analyst!) quote statistics that in general sound like: "Since the end of WWII average recessions have lasted X months, and thus we are almost through the current one, so buy what I am selling." Or the ever popular "Stocks tend to find the bottom in the middle of a recession, so now is the time to buy."
There will be lots of variations that all assume that past performance is somehow indicative of future results. And such an assumption is a prescription for investment pain.
First, there are not enough data points about recessions between the end of WWII and now to have any statistical meaning. I count 11 recessions since WWII. In what other human endeavor would we use just 11 data points and then decide to bet our hard-earned money? While average data can have meaning and give some grounds for comparison, it should be treated with heavy levels of skepticism when used as an argument for investing with conviction.
Yah.the only issue is that markets generally lead economics... but by how much? i think its too early
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?