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Big bear market bounce


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#11 linrom1

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Posted 15 May 2022 - 06:36 PM

First, I don't count a bear market by the CNBC invented definition of "down 20%".  That's an idiot definition created for a TV audience so they don't have to explain complicated definitions.  I consider a bear market as a significant decline in stock prices accompanied by a dislocation of the general economy that last for at least several months, and up to several years (such at 2000-2002).

 

Bull market tops are characterized by high PE ratio's relative to historical norm (in 2000 the PE on the S&P 500 peaked at 35), and in Dec. that PE was in the low 30 range (I use the 12 month trailing GAAP PE which is all facts and no future estimates), and I take it off the S&P website directly, so from the horses mouth.  That PE is high enough that we may have begun a secular bear market, but when a correction begins, nobody knows the duration nor magnitude.  We just have to wait and see.

 

My history shows a secular bull from the mid 1955's to 1969 (14 years), a secular bear from 1969 to 1982 (13 years, PE very undervalued), secular bull from 1982 to 2000 (18 years, PE dramatically overvalued), secular bear from 2000 to 2009 (10 years, to PE very undervalued), and a secular bull from 2009 to today (13 years, PE very overvalued in Dec. 2021).

 

Clearly a correction has begun.  Will it become a full fledged bear market?  I don't know, but beginning from such a high PE valuation, it stands a good chance.  We just had Q1 at -1.4% GDP, and the Fed has just begun raising interest rates into a slowing economy, that does not look good to me, and we have a long way to go with the rate hikes.  We have inflation running at 8% and that is not good.  We have a national debt of $31 trillion, and that is not good.

 

I'm cautious these days.

It's hard to argue with this logic -but; gold and stocks could all go up becasue of misnomer called "hyperinflation" ----it's really hyperdeflation as Hyper-tiger would call it. It's the act of higher inflation than previous inflation in a vain attempt to stave of deflationary debt collapse.


Edited by linrom1, 15 May 2022 - 06:38 PM.


#12 Rich C

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Posted 15 May 2022 - 07:46 PM

 

First, I don't count a bear market by the CNBC invented definition of "down 20%".  That's an idiot definition created for a TV audience so they don't have to explain complicated definitions.  I consider a bear market as a significant decline in stock prices accompanied by a dislocation of the general economy that last for at least several months, and up to several years (such at 2000-2002).

 

Bull market tops are characterized by high PE ratio's relative to historical norm (in 2000 the PE on the S&P 500 peaked at 35), and in Dec. that PE was in the low 30 range (I use the 12 month trailing GAAP PE which is all facts and no future estimates), and I take it off the S&P website directly, so from the horses mouth.  That PE is high enough that we may have begun a secular bear market, but when a correction begins, nobody knows the duration nor magnitude.  We just have to wait and see.

 

My history shows a secular bull from the mid 1955's to 1969 (14 years), a secular bear from 1969 to 1982 (13 years, PE very undervalued), secular bull from 1982 to 2000 (18 years, PE dramatically overvalued), secular bear from 2000 to 2009 (10 years, to PE very undervalued), and a secular bull from 2009 to today (13 years, PE very overvalued in Dec. 2021).

 

Clearly a correction has begun.  Will it become a full fledged bear market?  I don't know, but beginning from such a high PE valuation, it stands a good chance.  We just had Q1 at -1.4% GDP, and the Fed has just begun raising interest rates into a slowing economy, that does not look good to me, and we have a long way to go with the rate hikes.  We have inflation running at 8% and that is not good.  We have a national debt of $31 trillion, and that is not good.

 

I'm cautious these days.

It's hard to argue with this logic -but; gold and stocks could all go up becasue of misnomer called "hyperinflation" ----it's really hyperdeflation as Hyper-tiger would call it. It's the act of higher inflation than previous inflation in a vain attempt to stave of deflationary debt collapse.

 

What would happen if we go into a recession like Leon Cooperman or Paul Tudor Jones think is probable late this year of 2023, and the Fed would like to cut rates, but Fed Funds is only 2.5% - 3%?  There is not much room to cut rates, and inflation has not fallen below 5% and the Fed still needs to fight inflation.  I think there is a potential ugly scenario out there.


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