HOW TO KNOW WHEN THE BEAR MARKET IS OVER
For the past 6 months and longer everyone has been denying we are in a bear market. Mr. Market has not been paying attention to the nay sayers and has been declining. Yes, there have been rallies, but it is quite evident the major trend is down.
When did the bear start? There are many who will argue for certain dates; however, long term analysts believe it began in 2000. When market cycles are studied they run up and down in 16 - 18 year periods. If the 2000 date is correct the bull cycle ended in 2000 after 18 years and the new bear cycle now has another 10 years to go. Awful! Awful! I know you hate what I am saying. Truth is true and that is what the market is proclaiming.
During the bull market we had no 300 point up days. Did you know that is a common characteristic of bear markets? We are having many of them now.
The pretty cheerleaders on TV, economists, brokers (of course), financial planners, government officials, etc. have their heads in the sand shouting “correction”. As this gets worse they are going to help you go broke. Many of us know we are in a bear market and should not hold any equity positions, but how will we know when o buy again? Here are a few signs you will see in the coming years as the stock market declines:
1. All economists will become bears. The same ones who told you the economy was strong and you should hold your stocks.
2. The cheerleaders will be asking, “What are you selling?” not the usual, “What are you buying now?”
3. Volume will decline. Many mutual funds and hedge funds will have gone out of business.
4. CNBC-TV will shorten their program hours.
5. P/E (price/earnings) ratios will be around 7, not the current 18.
The market will go through a long period of “drying out”. The last few Buy N. Holders will be giving up. The little guy with his “safe” mutual funds will now be almost broke. Baby Boomers will no longer be Boomers and many will be working as greeters at Wal Mart.
I know you hate me by now for this gloomy scenario, but I hope I have scared you enough to start thinking about getting out of the market and into something with a guarantee. U.S. government bonds are not exciting, but al least you will get your money back. Don’t buy municipal bonds; many of them will default.
Start thinking about and putting an exit strategy into place now. The one who loses the least in a bear market is the winner.
Al Thomas’ book IF IT DOESN’T GO UP, DON’T BUY IT! has helped thousands make money and keep their profits. Read the first chapter at the web site www.mutualfundmagic.com . Discover why he is the man Wall Street does not want you to know. Copyright 2008 All rights reserved.