I was talking to my assistant this morning and she said that someone on one of the news stations was declaring an end to the bear market. I tell you what concerns me about this type of news casting. Of course, this guy might be right on the money and his guess (because no one can predict the future) might be lucky enough to be right.
Before I go on, I don’t want to always come out as the one who throws cold water on the party. Let’s face it – the stock market has had a few good days. That is the good news. At the same time, a few good days in the stock market don’t make for the end of a bear market.
Anyone who has taken the time to study bear markets, and especially anyone who is going to make predictions, would know that you not only look at bear markets from the standpoint of how much the stock market has lost, but you also look at it from the standpoint of time. The average length of the last three major bear markets has been 447 days. We are currently at day 268. If history is any indication, we still have a ways to go.
So, it is a little too early to be putting on the party hats and declaring an end to the bear. This is not the time to be complacent. In fact there is never a good time to be complacent when it comes to your investments and the subject of risk.
I have done quite a bit of research on the structure of this bear market. My analysis would suggest that the bear market actually started July 17, 2007. That would make this bear market one year old. That was the date the two Bear Sterns hedge funds were declared for the most part worthless because of all of the credit losses. That was the first of a year’s long series of problems in the credit markets which takes us to where we are today.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
