"Secular Bear Market"?

[FIREd]

I got a question for all of you statistical analysis geniuses. I have a friend who describes himself as a permabear. He has been very bearish since 2004 (and lost a lot of money accordingly), but now he is absolutely certain that we entered a "secular bear market" in 2000 and that the 2003-2007 period was just a hickup in a long term down trend. Now I understand what a bear market is, but how exactly does one define a "secular" bear market? How long does a bear market have to be before it technically becomes secular? I have heard people say 10-15 years... And since the 1920's have we ever experienced one? In the late 60's and in the 70's we had somewhat of a sideway market but could that be qualified as a secular bear market?

Thanks for your answers.

 

[haha]

Now I understand what a bear market is, but how exactly does one define a "secular" bear market?

Just substitute long, bad, and scary for secular. But secular sounds so much more educated.

Ha

 

[Scrapr]

The thing about Bears are that they have to be right sometime. Right? So they keep guessing/prognosticating that this next one is the mother of all Bear markets.

Joe Granville

nuff said

Joseph Granville - Wikipedia, the free encyclopedia

The Bears only have a very short time to sell thier wares. So they make a lot of noise. And the financial press eats it up

Buy GOLD!!!!!

 

[aenlighten]

Secular markets

Two nice views of this are Secular Stock Market, and 100 Year Bull. The market can be viewed as alternating between bull markets that rise with p/e expansion at ~14%, and sideways markets with p/e contraction at ~0% (excluding dividends). The latter tend to be dividend and value focused.

 

[FIREd]

Well, I don't intend to follow his advice anytime soon (after all he lost money in the last 3 years while I was earning nice returns) and I personally don't think that we are in a secular bear market. But my point was when you look at historical market returns since the 1920's, I can't really find a long, bad and scary down trend. Sure we had some pretty big drops (like in 1931, 1987, 2000...), but those where fairly short down trends followed by recovery periods of various lengths. Like I said earlier, the late 60's and 70's were not very good market years, but the trend looks hardly precipitous during that 15 year period. So bear's predictions have no historical basis (which of course does not make it a statistical impossibility!) or do they?

 

[ERD50]

I am more worried about missing a Bull market, than riding out a Bear market.

FireCalc has you in the market at whatever allocation you choose (75% equity default). So you get that success rate by being IN the market, and riding out the Bears. But, if you tried to side-step a Bear, and ended up missing a Bull - where might you end up?

I feel it is more dangerous to be OUT of the market, than it is to be IN the market.

Which does not mean I won't do it - just that I do think it is dangerous.

-ERD50

 

[FIREd]

Two nice views of this are Secular Stock Market, and 100 Year Bull. The market can be viewed as alternating between bull markets that rise with p/e expansion at ~14%, and sideways markets with p/e contraction at ~0% (excluding dividends). The latter tend to be dividend and value focused.

Cool! I tend to favor dividends and value investing, so I guess I am prepared for those sideways markets...

 

[Notmuchlonger]

One thing I do know. We will have bear markets and we will have bull markets. However my timing skills are lacking proceed at your own risk

 

[jazz4cash]

He has been very bearish since 2004 (and lost a lot of money accordingly), but now he is absolutely certain that we entered a "secular bear market" in 2000

So...it took four years for his 'indicators' to identify the event?

 

[Ed_The_Gypsy]

Joe Granville

A sad little man. "My name is Joe Granville, not God."

I was in the market in the early '70s and 1987 (just not enough) and still am, 100%. I just wish I knew then what I know now. 20% per year of nothing is still nothing.

It is kind of like surfing. Some time the waves are there and sometimes they ain't, but they will be back. You just have to be there when they are. Now I know I have to be there.

 

[FIREd]

So...it took four years for his 'indicators' to identify the event?

Well I am not sure what "indicators" he is/was looking at and I never ask because it does not interest me. I don't really look at statistics myself to make investment decisions (good old boglehead here). And I don't know what his opinion on the market was before 2004 but it sounds to me like he turned bearish when the market started dropping in 2000. What I know is that the recent market downturn, the housing market bust, the talk about recession, the fear about inflation, the uptick in unemployment have just reinforced his belief that he was right all along and that we have been in a secular bear market which started in 2000. Time will tell if he was right or not...

 

[Maurice]

"Secular" in this case just means 'ongoing' or 'through the ages' (one of the dictionary definitions of secular). What it means generally is the underlying long-term trend, once you net out cyclical behavior. Your friend is wrong by the way. Corporations are the principle economic actors in the modern economy, and stock represents ownership interest in them. To believe in a 'secular' bear market is to believe that economic growth will stop and reverse itself, not just for a quarter or two, but in an 'ongoing' way, 'through the ages' as it were.


A stopped clock is right twice a day, and the permabears are right twice a decade. The difference is the permabears are far more obnoxious when their moments come. You'll never see a stopped clock say "SEEEEE? I TOOOOOOOLD YOU IT WAS 12:17. But NOOOOOOO, you didn't believe me."

 

[danm]

Read 'Unexpected Returns: Understanding Secular Stock Market Cycles'

Data available here Matrix Options

Or this

http://www.crestmontresearch.com/pdfs/Stock Secular Chart.pdf

 

[maddythebeagle]

Secular means he doesnt go to church...surprised nobody hit that softball...

 

[armor99]

I am glad someone brought this topic up, because I have been seeing a strange trend recently in the media. My perceptions of this might be wrong, but it seems as of the last few months or so the media is actually "rooting" for a recession. This is something I guess I do not understand. I would think that no one.... wants a recession. In every story I read online or when I watch the news, the doom and gloom masters are out again, reminding us the financial world is about to end. I remember just the other day they were making a huge deal out of the fact the the unemployment rate went to 5% from 4.7%. Now granted this is a large jump in one month, but historically 5% is by any measure really low!
When it comes to the market, perception is EVERYTHING! So when the media keeps trying to "doom and gloom it up" for lack of a better term, it has the effect of making theory into fact. So by their ceasless, incessant, endlessly negative coverage, it has the net effect of making it happen, rather than just reporting about what happened. I could be completely off base on this one, some of my friends say it is politically motivated, others say that negative news always sells so they always do that. Not sure here.. I was wondering what some other folks thought about it?

 

[Rustic23]

I truly believe that there is a sector of the media that has a political agenda. I watched a NBC news anchor beam when Bill Clinton was elected, I also watched the same anchor look like he was going to a funeral when George Bush Senior and Junior were elected. I watched the 'state of the economy' reported as bleak dismal etc. before the Clinton election, and within a month after his election things were 'improving' 'economy getting stronger' and by the time he took office things were, well just great. Bush has a 5% um employment rate. This up from 4.7. You would think this is the worst thing the economy has ever suffered the great depression is around the corner, bread lines, soup kitchens, yet it has often been thought of as 'full employment' by many economist. Between now and the next elections, I'm expecting the worst spin on the news possible. It is what is bad for the incumbent President. I also don't expect to see Congress, the real spenders of money in our government, taken to task at all.

 

[FinanceDude]

It sounds like "CNBC market speak jargon" to me........

I still have the poster made from the WSJ on late 1999, with the caption:

"Bulls say hot market likely to go much higher"

Now, that ended well, yes

 

[W2R]

I still have the poster made from the WSJ on late 1999, with the caption:

"Bulls say hot market likely to go much higher"

Now, that ended well, yes

I love it! Now, if I had that on my wall, I'd remember to take these columnists with a HUGE grain of salt.

 

[FinanceDude]

I love it! Now, if I had that on my wall, I'd remember to take these columnists with a HUGE grain of salt.

I'll see if I can take a digital pic and post it on here. I got it from a mutual fund wholesaler in late 2000............

 

[Gearhead Jim]

As someone pointed out, market timers need to be correct twice: when to get out and when to get back in. Miss either one and you could be worse off than buy and hold.

 

[FinanceDude]

As someone pointed out, market timers need to be correct twice: when to get out and when to get back in. Miss either one and you could be worse off than buy and hold.

And most are way wrong.......buy and holders smoke about 99.99% of all market timers..........

 

[aenlighten]

Not quite

To believe in a 'secular' bear market is to believe that economic growth will stop and reverse itself, not just for a quarter or two, but in an 'ongoing' way, 'through the ages' as it were.

It is more a reflection of psychology, thus the change in p/e ratios. In bull markets, people jump on the bandwagon expecting more growth than will occur and bid up assets, driving down future returns, while in bear markets they shun risk and avoid equities which become bargains with higher future returns. Economic growth, while variable, is more uniform over time. When people express concern over reaching new highs seven years later, it is pretty much an indication of this. We should reach new highs every year simply due to inflation. Still, I don't see anyway of predicting changes in psychology.

 

[FinanceDude]

It is more a reflection of psychology, thus the change in p/e ratios. In bull markets, people jump on the bandwagon expecting more growth than will occur and bid up assets, driving down future returns, while in bear markets they shun risk and avoid equities which become bargains with higher future returns. Economic growth, while variable, is more uniform over time. When people express concern over reaching new highs seven years later, it is pretty much an indication of this. We should reach new highs every year simply due to inflation. Still, I don't see anyway of predicting changes in psychology.

Greed and fear still rule investors, and their behavior reflects it. The best place to be in 2000 was short-term Treasuries, but how many investors do you think sold their CMGI and bought them I know, everyone's brilliant in hindsight..........

 

[al_bundy]

I got a question for all of you statistical analysis geniuses. I have a friend who describes himself as a permabear. He has been very bearish since 2004 (and lost a lot of money accordingly), but now he is absolutely certain that we entered a "secular bear market" in 2000 and that the 2003-2007 period was just a hickup in a long term down trend. Now I understand what a bear market is, but how exactly does one define a "secular" bear market? How long does a bear market have to be before it technically becomes secular? I have heard people say 10-15 years... And since the 1920's have we ever experienced one? In the late 60's and in the 70's we had somewhat of a sideway market but could that be qualified as a secular bear market?

Thanks for your answers.

check the Dow charts going back to the 1800's. there are numerous cycles of 15-20 years of a bull followed by a flat or bear market. 1929 - 1950, 1968 - 1982 are two examples where the Dow took something like 20 years to break the old high.

SP500 is more broad and doesn't really follow the same pattern. in the last bear market it's was more like a W