This is Not a Bear Market

[DbPhoenix 42]

This is not a bear market. Certain sectors such as tech have had large downward moves, but the market as a whole is only down about 7.5% for the year as measured by the NASDAQ and only 9.3% with the Dow Jones Industrial Average. That doesn't make a bear market. And there are good reasons why this market won't get much worse.

 

A bear market doesn't just happen. There are circumstances that develop that make investors nervous. When they get nervous they sell, in quantity. The most common elements are:

 

- High inflation rates. While the government announced last week that it had been under-reporting inflation rates because of its calculations for the Consumer Price Index (CPI), but the revised numbers show an increase from 2.7% from 2.6%, nothing of consequence. To counter inflation, the economy needs strong productivity. It certainly has that. Until prices on everything act like the price of gas, inflation isn't part of the picture.

 

- High interest rates. Rates are relatively high when compared to the last few years, but that's because the economy has been growing a little too fast for the Fed's comfort. The Fed has stopped raising rates for now. They won't seriously consider raising them again until after the election. If they give a strong warning of concern about the economy growing too fast and raise the rates another notch, this could be troubling. But that isn't the most likely scenario, according to many analysts.

 

- War. When we're at war, the government spends a lot of money. The demand for goods and services competes with normal demand and pushes prices higher. We're not at war, and there doesn't seem to be any saber rattling at the moment.

 

- High anxiety. The general feeling that there is too much uncertainty in the future or there is an exogenous shock to the economic system, such as the oil price escalation in the 70's. While oil has gone to extreme highs in the last year, because the economy in general is doing so well, it has not been unsettling. Also, there's the belief that oil production will increase, and prices will decrease over time.

 

- Earnings slow down. If reported earnings, in all sectors of the market, slow down, and the forecasts suggest even further slowing, then the bears come out in droves. Right now, there are a few large companies that have seen a slow down in the rate of growth of earnings (Intel is the best example), but not everyone. Furthermore, they are still growing. The growth hasn't stopped.

 

Of course, there are other reasons for the market to go into a tailspin, but those are the major ones. We don't have any of them to any magnitude that would cause a bear market. What we do have right now is a concern over some of the bell weather stocks coming up short in earnings or revenues. And they're taking quite a few of the other stocks down with them. If those companies can turn their current concerns around and report good earnings and revenue growth again in the fourth quarter, these same stocks will be rocketing ahead again. It's impossible to tell what they'll do in the future, but if the past is any guide, better days are definitely ahead.

 

- Ted Allrich, Online Investor, September 29, 2000

 

 

Aren't gurus wunnerful?

[diablo272 10]

I read that and I was thinking a big WTF??? but then i saw that it was from 2000 .

[timturks 10]

I also said W.T.F. but then I read your post that pointed out it was from 2000

 

Why is it still posted here being that old???

[wjrusnak 10]

I think he's trying to make the point that guru's aren't always right

[brownsfan019 17]

I think he's trying to make the point that guru's aren't always right

 

Ain't that the truth. Some even attempt to pose as a guru on forums on the net b/c it's easy and people want to believe in something. When the said guru is pressed for evidence of knowing what they are talking about, the question is quickly dismissed w/ some gibberish.

 

Moral of story - be very careful who you define as a 'guru' to you and make sure the person providing this 'advice' actually knows what they are talking about.

 

[thalestrader 14]

When the said guru is pressed for evidence of knowing what they are talking about, the question is quickly dismissed w/ some gibberish.

 

Moral of story - be very careful who you define as a 'guru' to you and make sure the person providing this 'advice' actually knows what they are talking about.

 

 

Indeed, Brownie. Another sure sign of the would-be Guru is that when someone asks said guru a question about his analysis or method or what have you and, the guru answers your question not with an explanation, but with a question to you, or else, he just gets defensive.

 

Best Wishes,

 

Thales