The Big Bad Bear

The large bad bear is stirring again. So far he have stretched, yawned and ailing out of his cave. After his almost year-long nap he is hungry. A nice large steak would hit the spot.

That steak come ups from cattle and not too far from his lair there is a fat self-satisfied bull munching in the pasture. He have his tail towards the bear and Mr. Bear retrieves that 3 old age ago he walked up to another bull and spot him in the backside. It looks like he can make it again.

We cognize who bull and bear really are. It looks that almost everyone is bullish and believes we are in another bull market like the 1 in 1999 where all investors thought they were geniuses. History have taught (for those who wish to listen and learn) that major bull markets are followed by bear markets of equal length. The major bull came to an end after 18 old age in 2000. Can we anticipate an 18-year bear market? If history repetitions its rhythm the reply is yes.

The recent tax return of the upward motion of stock terms from last twelvemonth is very typical of mass meetings in bear markets. Many have got a 50% retracement of the first down leg (as happened after the large interruption in 1929) that tops out with the recommencement of the downward path.

Today our bull is feeding on the lowest interest rates in 40 years, a tax cut that put option extra money in the custody of consumers (where it belongs) and a strong lodging market plus the belief that the market always makes well in an election year. Let’s hope all these things will come up to pass.

The worst problem for investors is their complacency. They begin making money and forget to protect their profits. These faux pas away when the market starts down and their broker says, “Don’t worry. The market always come ups back”. If the investor did not learn to protect his assets from the 2000 fiasco he is doomed to lose again. What should he do?

He should protect his investing account with stop-loss orders on all pillory and mental Michigan for all common funds. Brokers detest this and will seek to speak their clients out of doing it. Why? Because he do a committee as long as you are invested and nil if you have got cash inch your money market.

It is better to do 1% in a money market than lose 20% Oregon more than of the rule as the market caputs south. You don’t have got to be a market “expert” to put a stop. Decide how much hazard you are will to take 5%, 10%, 15%? And topographic point your halt accordingly.

When this bear come ups out of his cave don’t allow him seize with teeth you – you cognize where.