Investing strategies and secular bear markets
Essentially winner69 is a long term investor, ie wants to maximise long term returns) but also hates losing money
Winner69 has a strategy:
Since 2000 the underlying hypothesis about long term market conditions that drives my investment habits have been
- The US market commenced a secular bear market period in 2000. This followed a secular bull market that run from 1982-1999
- In a secular bear market long term returns are essentially zilch, even though there can be periods when the market can go up more than 20% in any one year.
- Secular bear or bull markets have in the past averaged 13-14 years
- By implication the NZ market is tied to these long term trends
Winners investment strategy is:
- Because long term market returns will probably be very low become a stock picker and pick long term growth prospects based on fundamentals.
- As market sentiment is stronger than fundamentals and hope only hold stocks that are trending upwards. During times over real market weakness tighten up trailing stops (essentially the Phaedrus long term trading strategy)
- To maximise returns while retaining some degree of diversification perferable number of stocks is 5, but no more than 10 at any one.
- Don't worry about portfolio weights - because all stock picks will be trending up
- Because I understand NZ and Autralia markets and economies restrict stock picks to these markets
- Do not be embarassed to be 100% cashed up if necessary
Whats happening now
In December 1999 the DOW was 11497 - currently 12486 -- up 8.6% over the last 7 years is some effort eh .... see what I mean about a secular bear market .... about half way one through I guess.
Since and inc 2000 the DOW has had 3 up years and 4 down years.... this year prob a down so the score is 3/5 ... see what I mean about a secular bear market
The current downturn is only adjusting for the recent 'bull market' correction that occurs during secular bear markets - and this downturn is only 10% off a high so probably has a lot more to go
Both the NZ and Aust markets have performed much better over the last few years and are currently valued at PEs seen at the highs of market valuations ..... nowhere where they end up at an end of a secular bear market.
Result of all - as of today nearly cashed up .... and not embarassed at all
Interpretation of secular bear market
Yep interpretation is everything. One can choose the time period to validate their arguments.
You say Dow is in a 7 year secular bear market, I say Dow is in a 4 year secular bull market after a 3 year bear market, some say gold in 27 year bear market, Dow in 25 year bull market etc etc.
Interesting re TRS - great stock but very illiquid. No problem moving $10K worth but what if you bought $1M at IPO and/or accumulated $1M over the time since the IPO? Ditto housing, you have to wait months to try and sell if things go sour, or have a fire sale. And this correction has only lasted 4 weeks!!!
Also interesting to compare this correction vs a similar credit crunch episode in 1998 (LTCM/Russian debt crisis). Market retreated 17% but recovered its losses within 5 months. The 1998 correction started around the same time of year too.
Dow up 44.95 point s on Monday
Quote:
Originally Posted by
Hoop
Monday in USA been and gone and after a 100 down start the DOW finished only 5 points down.....
I believe that the Dow finished 44.95 points up at 13,566.97 on Monday. Friday's close was 13,522.02.
http://uk.ichart.yahoo.com/b?s=%5EDJI
David Dreman's Advice for a Bear Market
Quote:
Originally Posted by
Hoop
PAUL B. FARRELL
14 winning strategies for a bear-market recession
Commentary: Sell stocks, realty, commodities, and buy bonds, dollar
That was an interesting article by Farrell. David Dreman expressed almost the opposite point of view in one of his regular his Forbes Magazine articles last October http://www.forbes.com/personalfinanc.../1015/106.html (free access but registration is required).
The article title "Panic No. 12" referred to the twelve major market sell-offs since the end of World War II. Dreman says:
Since coming to Wall Street in the late 1960s, I have been through seven such crises. Somehow, the market survived them and thrived. Look back even further to the period following the end of World War II, and sure enough, you'll find that pattern holding in four more market spills. Beginning with the first postwar panic, resulting from the 1948--49 Berlin blockade, stocks have tumbled only to come roaring back to new highs. The worst market break came in 1973--74, during a nasty recession and the Arab oil embargo. The most recent was the dot-com slide, which began in March 2000 and ended in late 2002. The Nasdaq Composite, heavy with tech names, still has not regained the ground lost in that crash, but the broad indexes have.
During each crisis investors felt confused, uncertain and panicky. They believed nothing in their previous experience could help them cope with the ominous new world they faced. "Sell, sell, sell," their inner worrywarts advised. "Save your capital before it's too late."
This almost always turned out to be a bad move. Selling in a crisis is foolish. Yes, if you had sold the S&P 500, say, a year into the bear market, in March 2001, you would have avoided another 28% decline before it hit bottom. But would you have had the wisdom to get back into stocks a year and a half later? I don't know of anyone advising an exit in March 2001 who also switched to a bullish stance in fall 2002. And if you had sold in March 2001, and stayed out, you would have missed an opportunity. Since then the stock market has returned 46% (including dividends). On average, for each of the dozen crises, the market was up 36% one year after the low point, 44% after two years.
Today's stock market remains solid with good fundamentals and many cheap stocks at hand. The ongoing liquidity crisis must be handled gingerly, of course. Commit your capital slowly as several more shocks must be absorbed before a broad market rally begins.
Dreman and Buffet (and Ben Graham)
Quote:
Originally Posted by
Hoop
Deev It seems David Dremans strategies have touch of Buffet.
Similarities aren't surprising I suppose. They were both students of Ben Graham at Columbia University, although Dreman's approach is closer to Graham's concentrating more on quantitative analysis while Buffet places more emphasis on the quality of management and identification of companies with "defensive moats" etc
is the reccession over before it began
there's going to some grumpy, sore headed bears around by the end of this year
is the reccession over before it began
One of my favourite analysts Dr Copper seems to think so