Tag Archives: Bear Market

Bear has begun and shows no signs of Returning to Cave anytime soon

Historic is hardly the word for it. At times like these it seems like we have to repeat to ourselves “it’s just stock prices”. The VIX, a measure of “fear” in colloquial terms, rose 40% to hit the highest point in history at 80, two points above the level that it was at on two previous occasions. Both of those previous occasions were during the 2008 financial crisis.

The unique fact in the mix, this time around, is that these extreme readings in the fear gauge and the obvious volatility that has the Dow up and or down one thousand to three thousand points on any give day and it’s almost “normal” is all happening barely a month from the all time high that was reached on Feb 12th.

And therein, as they say, lies the rub. The bear market that started last week, based on the common but meaningless measurement of a 20% drop from that high, likely has a long time yet to go. Naturally there will be ferocious short covering rallies and even, eventually, slow days without mega up or down moves. But just because the percentages from the high are large, or because the VIX is at its all time high, does not mean that the bear market will be over soon.

The novel coronavirus is clearly a serious event and will cause disruption both economically and in the disruption of our daily lives, but the bear market that was, in truth, long overdue would have happened eventually in any case as bear markets always follow bull markets eventually. The concern is that the remedies and actions by the Fed and the political establishment never addressed the underlying causes and weaknesses of the entire system during the 2008 crisis, dooming us all to re-live that terrible time, potentially with an even more extreme set of circumstances.

Let’s hope that both the health crisis and the parallel financial crisis will be less dangerous and less extreme than it would appear on a day like this one.

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Business, Observation, Stock Market

Dow Plunges in Largest 1-Day Point Drop in History – and it’s Still not Because of the Coronavirus

February 27, 2020 Danny Leeds

Down nearly 4000 points in Five Days in Correction Territory, but Bear is Still Hiding in Plain Sight

At the time of this writing the DJIA futures are down nearly 400 additional points (1.54%) at 25,161. As is often the case at major market turning points there is talk of corrections (commonly measured as a drop of 10% but less than 20%) and, naturally, afterwards, a probable return to all time highs.

There are ridiculous attempts to “blame” the drop on the election, Bernie Sanders, The Corona Virus and even an intentional combination of all of the above to sabotage Trump’s re-election hopes.

The financial press has a similar job to the President, to calm fears. That’s why there are numerous articles that all say the same thing: don’t worry, corrections are healthy, by definition they represent a decline of 10% or more – and are not the start of a Bear Market. Unless they are.

There are articles advising to buy the dip, or to wait a little longer and then buy the dip. There are literally dozens of articles saying that virtually 100% of the downturn is based on “fears” that can be directly attributed to the Coronavirus.

More honest are the articles that use the word “amid” as in “Dow tumbles almost 1,200 points, 124-year record, amid coronavirus scare”. The word amid implying that the two things – the scare and the drop in stocks are in proximity, yet not necessarily a case of causation and causal correlation.

Naturally, being a part of the world economic situation, the virus and fears that it will spread and become a Pandemic have an impact. But 100%? As if all sellers are literally freaking out together about precisely this one thing?

Just as Summer leads to Fall and Fall Leads to Winter, there’s another Explanation the we should All Consider

The minority of the media weighing in, and from anecdotal evidence it is a tiny, tiny faction of the whole, actually mention the most likely and even obvious “cause” for the market showing a very strong propensity for decline at this juncture. The fact that Bull markets always end eventually and are followed by Bear markets.

Further, that the many all time highs that Trump has been touting at every opportunity were, in reality, the last throes of a bull market that was juiced in every possible way, initially to stimulate the economy after the 2008 “Great Recession” and, more recently, at Trump’s prodding, to help with his re-election efforts.

Optimism has been off the charts, and investing and paying insane sums to invest in companies that have zero profits was, until very recently, considered by many a permanent condition that would just keep expanding, along with the beneficiaries.

So, in the midst of all kinds of likely causes and reasons, the most obvious, the most likely, the most logical and the reason that is being emphasized by the extent that it is being ignored and ruled out stands out clearly, like a beacon in the fog.

A long overdue Bear Market has started. Just as with a virus threatening our health, it is best to be prepared if there is a chance ( possibly, a very significant chance) that it is coming.

Say the B Word, have no Fear, as Forewarned is Forearmed

So, rather than being behind the curve as wishful thinking grips us and makes literally any other explanation than the obvious one more attractive, it’s best to at least come to grips with the Bear Market scenario.

If this is the start of a Bear Market phase, here is what will happen next. This initial drop will continue for hours or days longer but not weeks. That will be followed by a rebound, possibly sharp, that will last a few weeks or even longer – climbing and clawing up takes longer than a straight drop.

Then, right around the time that all the articles are saying the worst is probably over, that all time highs are possible even likely, the next down phase will come. It will be at least as strong and deep as the current one and once it is about halfway through it’s decline many will begin to change perspective and become pessimistic for the first time in years.

So, prepare and be safe, both regarding your health, and finances. Hope for the best but prepare for the worst or, at least, the unanimously unexpected.

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Business, Economics, Stock Market

Stock Market Outlook 2019

February 11, 2019 Lynxotic News Staff

Consensus Views Or Contrary Swans

Funny thing about consensus vs. contrary views – they are often identical if you believe what you read. “Wall of worry” and “Slope of Hope”: it’s all irrelevant if you are wearing blinders and have no mooring, or any basis for what the facts are.

Add to all that the fact that most opinions are paid advertisements, mainly for sell-side firms, and it’s tough to wade through the B.S. As per usual, according to a survey from CNBC, the S&P 500 will reach 3000 by the end of 2019.

According to my own non-scientific survey this is the 20th consecutive year that such surveys predict a gain in the market. A prediction for the coming or current year is almost always positive. The negative predictions are saved for “next year” (in other words later in 2020 as seen from in early 2019). Then, of course, the predictions change, and turn positive, just before the year turns.

Such nonsense goes even deeper while pundits and hacks will cite “pervasive pessimism” in the face of almost total bullishness to claim to have a “contrary” view while in reality herding like Spanish bulls in springtime.

“It’s tough to make predictions, especially about the future”
Yogi Berra

Using actual data such as the Put-Call Ratio, VIX, AAII Sentiment Survey, or, for example, levels of margin debt and mutual fund money flows, can at least give a picture of the state against which one intends to be contrary.

Then, once in a while, in full-on Black Swan fashion, the prevailing “wisdom” blows up and everyone declares shock that such a thing could happen. A recent example of this was the disastrous collapse of the “short vol” trade in February of 2018.

A one-eyed man in the land of the blind can see a bit more than the rest. A first step is to be aware of the hype and see past the herd. In the last 100 years, Bull markets have tended to last longer than Bear markets (which move faster) and that alone leads to a bias toward a false idea that investing in stocks can lead to a steady, constant gain profile.

To sum up our outlook for 2019 in terms of end of year projections, the word “grim” comes to mind. Bear Markets follow Bull Markets, Raising Rates pop bubbles, the 2008 excess was never dealt with, and on and on and on. Clearly, the most bullish possible prediction anyone looking at facts could possibly make is that the next down phase in the market might come a bit later (2020 anyone?) rather than sooner.

Naturally, that is exactly what the “pessimistic” pundits are predicting. Far from pessimistic in reality, this is the most wildly optimistic, bullish possible take on the current juncture imaginable. Perfect for the true contrarian outlook which points toward a real Bear Market, sooner rather than later.

This is not to say that it looks like all gloom and doom for the coming year(s). There are exciting changes afoot, particularly in media and digital communication, and, as with all times of great change, the aftermath of the coming storm points toward a cleansing and realignment of world economies and cultures. Bring it on…….