secular bear market

Fear of Heights

I.C. Angles Investment Post…

As the stock market makes new highs, there are many reasons to worry that the fall could be particularly hard when it comes. I’m no permabear and have not been constantly arguing a bear market is around the corner. Even if I haven’t been the biggest cheerleader of stocks I have been an advocate. For example in August of 2011 I wrote about how, despite negatives, stocks were the best investment options available to most and in my February post this year I argued that despite rising risks investors should continue to hold stocks and a decline was unlikely to transpire until 2014. At the same time, starting in May of this year, as the stock market kept making new highs, I began to argue that risks in 2013 were rising and investors should use the strength to raise cash levels and sell some stocks, particularly money involving a low risk threshold and time horizon. As I look at where the stock market stands at the end of the year, I continue to believe the risks of a bear market being sooner rather than later have only grown.

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It’s Not Different this Time

I.C. Angles Investment Post…

To believe that the stock market will rise significantly from its recent August highs, when the S&P 500 reached over 1,700 points or not revisit near its lows, is to bet that it is different this time. The famous declaration of legendary investor, Sir John Templeton, that, “The four most dangerous words in investing are, it’s different this time” has over the past few months become particularly pertinent. The secular bear market that began in 2000 (when investors believed it was different that time and the Internet had fundamentally changed the nature of the stock market removing the risk of a major bear market) would need to have ended in the 2009 bottom for the stock market to now rise significantly higher or not fall to around previous lows. But there is little reason to believe this time is different, that stocks entered a new secular bull market in 2009, well below the typical duration of a secular bear market and that the odds now favor a heavy allocation to stocks.

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