It's a recession when your neighbour loses his job; it's a depression when you lose yours.
Harry S. Truman
The bear market of 2007 is unprecedented in the modern times. At the onset of the bear market in late 2007, a few savvy market observers started to contemplate whether the bear market of 2007 was going to be a replay of 1973-1974 or 1981-1982. Well, their bets are off :-). With the greatest predicting power of the stock market, the vicious decline and the historical volatility in the last two months foretell we are going to witness the worst ever bear market since the great depression of 1929.
Over a short span of 10 years, our generation has tasted twice the bitter fruits of bubble economies, the burst of the internet bubble in 2000 and the collapse of the housing bubble coupled with credit market bubble and commodity bubble as of today. How many had thought that they would never see another 2000 alike bubble again in their lifetime a few years ago? Well 8 years later, a once in a hundred years event happens again, though in a slightly twisted form but with even more destructive consequences.
Bear market is a great time to reflect ...
Bear market is a great time to relax and reflect. It is a period where great efforts should be devoted not to trading, but to thinking. You should protect your capital, save your ammunition to wait patiently for the next brand new bull market with clear understanding that the easiest (with minimum risk) and the biggest money are made in bull not in bear. This is the drive behind my embarking on the road to study the history of the bear markets in the last hundred years.
In the next series of articles, we will study the major bear markets in the past, the top which led to the collapse of the stock market, the bottom which proceeded the emerging brand new bull and the false bear market rally(ies) which sucked in all the premature bottom callers in between ... We will return to this topic next week.
Current US Market:
The fact that market rallied in face of the ugly employment data last Friday is encouraging. Have we priced in all the bad news? Will the approval of some type of loan to the big three auto makers from Congress this week provide the catalyst to the much waited year end bear market rally? (or the rejection of the loan to derail the rally?). Let's wait and see.
Chinese Market:
The picture in China looks much better than US. I think the strong bear market rally has started. Here is the picture of FXI. Chinese market could rally all the way to 200MA of major indexes.
I am going to put some money to work on FXI with stop loss around 25.
Other Stocks
- Continue to hold AXYS taken last Wednesday.
