I have a few good quotes about secular bear markets in The Bear: Dead or Just Sleeping?:

“And, in fact, many in the bear camp believe the market is destined to meet its maker as soon as the Fed starts to raise interest rates – which could happen late this year.

“When rates go up, it becomes more expensive to borrow, corporate profits slide – all the negative things that take place that make the market less appealing as an investment opportunity,” Mr. Ritholtz says.

In fact, Mr. Ritholtz is one of several commentators who believe this rally has merely been a temporary cyclical swing in the midst of a longer-term bear market – one that began roughly a decade ago and is far from over. These long-term, or “secular,” market trends tend to last 15 to 20 years.

“This does not have the characteristics of a secular bull market,” Mr. Ritholtz says. Not only would it be starting ahead of schedule, he argues, but even at the market lows of a year ago the stock valuations were never as low as they typically get at turning points in secular market trends.

“In the past, at the start of these big secular bull markets, you have really cheap stocks … I’m not sure we ever got to that point,” he says. “Stocks became reasonable in March [2009] for a month. Now, there are plenty of stocks that are expensive and there are plenty of indexes that are pricey.”

There is a lot more in the article . . .



The bear: Dead or just sleeping?
David Parkinson
From Thursday’s Globe and Mail
Published on Thursday, Mar. 11, 2010 XXX http://www.theglobeandmail.com/globe-investor/the-bear-market-dead-or-just-sleeping/article1497020/

Category: Markets, Technical Analysis

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

41 Responses to “The Hibernating Bear”

  1. cognos says:

    That chart with the shaded regions could not be more arbitrary.

  2. DoctoRx says:

    Well done , Barry

    Of course, it’s a market of stocks. From 1997/8 till March 2000, the averages went up but the Value Line “average” stock did not. Numerous stocks and sectors bottomed in March 2000 just as the bubble stuff was topping. The Russell 2000 hit new highs mid-way into 2002, well before the double bottom in fall 2002/winter 2003.

    Sometimes the averages hide as much as they reveal.

  3. Chief Tomahawk says:

    Feedburner now showing “140k” readers!!!! Almost as big as CNBC’s audience…

  4. Marcus Aurelius says:

    The Bear: Dead or Just Sleeping?

    Don’t know. Why don’t you poke it with a stick and we’ll find out.

  5. tbapple says:

    Actual reform, jail terms and recognition of reality are all that is required to wake the Bear.

  6. Marcus Aurelius says:

    cognos Says:

    That chart with the shaded regions could not be more arbitrary.

    That statement applies equally as well to our entire economy (with all of its “shady regions”).

  7. Joe Retail says:

    A couple of questions:

    1. I keep hearing that there’s no borrowing going on (lack of supply or lack of demand, depending on who you ask). So why will an increase in interest rates change anything?

    2. The “bear markets” in the chart basically look like periods of flat markets. So if Joe Retail is sitting on a portfolio mostly made up of nice dividend payers, what exactly does he have to worry about aside from a period of lower capital gains?

  8. hr says:

    Another comment on that chart:

    Why aren’t long-term charts like that inflation-adjusted?

    The market has NOT gone up 100-fold in the last century. We are counting with a shrinking fiat currency.

  9. tagyoureit says:

    So, once the secular bear is over in maybe another 8 to 10 years, then DOW is going from 10,000 to 100,000 over 20 years?

    1929 – 1944, war
    1944 – 1964, 100 to 1,000
    1965 – 1981, war
    1982 – 2000, 1,000 to 10,000
    2000 – 2020, war
    2020 – 2040, 10,000 to 100,000?

    Then again, I’m not the sharpest sandwich in the picnic. Maybe I’m not getting the correct message?

  10. Joe Retail says:

    hr is absolutely right. Charts like this (here comes the pet peeve) should also use a log scale.

    Which would answer tag’s question: Yes, that would seem perfectly normal – each of the increases shown is one order of magnitude.

  11. Uchicagoman says:

    @hr: Yeah! There’s no way the Internet, robotics, and airplanes are 100x more efficient and productive than me horse-
    carriage and telegraph! Pony Express my sputnik! ;-)

    @tagyoureit: I think you’ve got the right idea. Long-term, baby. Warren Buffett-esque. New ones come along, every generation grows older, people just keeps on-a truckin’. They say f*** it, let’s move on.

  12. dead hobo says:

    Let’s see. The Federal government and the Federal Reserve are backstopping most of the economy at this time. Various sectors still have a pulse, but the overall market is more a product of massive liquidity and the ability of hot money to drive prices up; asset inflation in other words. It’s just the asset inflation isn’t as flagrant as it was a couple of years ago.

    Money isn’t flowing aggressively to small business. The hot money chases paper flipping and commodity inflation. Government regulation that promotes economic growth does not exist and likely won’t any time soon. Wall Street lobbyists will see to it. Wall street would rather flip paper to greater fools and make a lot of money doing that then make a few measly percent on business loans and loan fees. Therefore, there is no economic recovery in sight because there is no incentive to put capital into real business.

    Keeping the stock market propped up is a second best strategy, as compared to real economic growth, and massive liquidity combined with few regulations is all it takes for that. Putting it all together, more of the same is in the forecast for all of the foreseeable future. The Fed can be expected to support a stable stock market in the name of protecting the financial markets. High liquidity will remain a constant in one form or another.

    This means the real economy has yet to fully bottom and the return trip up will not be enhanced by large amounts of consumer spending. Capital has no incentive to invest in activities that promote real growth and jobs.

    Now that my voluntary ‘obligation’ to backstop my elderly relative is gone, I plan to get in on the next dip and ride the liquidity waves once again. I no longer need to invest like an 80 year old. My best guess at this time is a sideways market has the highest probability and range trading is the best strategy. Massive liquidity will make all sectors equally appealing, although some might look better than others marginally. The Fed won’t let the markets fall far (Bernanke Put) and the economy is still forming a bottom that has no incentive to turn upwards again. The only upside at this time is HFT churn suitable only for day traders.

  13. cognos says:

    dead hobo –

    Disagree with every loose statement you made. Recovery looks good. Stronger than expected. Actually MOST sectors of the economy look strong outside financials, housing, REITs. In fact, if you ran ex-financials performance of stocks (both the index price and the earnings) things probably look like they’ll make new highs soon. Earnings have been better than expected for 4 straight quarters (that will continue).

    TARP is 90% paid back. Fed special facilites and mortgage purchases are ending and already irrelevant. Payrolls will start gaining 200k, 300k, 400k next 3 months. More and more economists are starting to say “unemployment peaked at 10.1%”. Will be ~2% lower in 1 year.

    Things may “double dip”… which I think is extremely unlikely… but the current trajectory is STRONG recovery (GDP was +5.9% in Q4).

  14. Marcus Aurelius says:

    cognose ignores the unsettled debt — personal and private. cognose ignores trade and budget deficits. cognose ignores the falling dollar. cognose ignores the unemployed (and those who will be employed at a continuous loss). cognose seems to rely on ignorance.

  15. WFTA says:

    I’m with tagyoureit. There is a lot more going on in the overall economy. To war, I would add “guns and butter” and make a nod to the oil shocks of the seventies.

    I’m generally suspicious of the idea of market cycles. It gives credence to the notion that the current crisis is a natural phenomenon, not the result of recklessness and, to some degree, criminality.

  16. Mannwich says:

    @Marcus: cognose assumes that since life is good for HIM, then there must be a “recovery”. Just got back from skiing in Steamboat. Life is good for Mannwich, but the resort was half-empty. Lots of empty-looking new condos (and store fronts) sitting there with no occupants and a sparsely-filled hill to ski on,. even on Saturday. Was great for me (aside from the absurd $95 lift ticket) but doesn’t look so good for the resort or town (or THAT economy). The dive bars were filled though. All is well in cognose-land, so the recovery is on baby!

  17. cognos says:

    Guys –

    I pay attention to numbers (and try to say things that can be true or false).

    Q4 GDP = 5.9%
    TTM earnings ~$63/shr (versus $40 expectation in early 2009).
    Earnings have “beat” for 4 straight Qs. Q1 is already baked another “beat”… $18/shr.
    Yield curve continues to forecast recovery (all-time steeps).
    Jobs numbers have gone from -700k/mon to flat to what next? (jobs are always the last to turn).
    Corporate balance sheets are the best ever. Cash at all time highs. 71 of the S&P500 companies have RAISED dividends so far this year.
    Many companies have said Q1 is “comping” better than expected including — CSCO, MCD, F, AAPL, HPQ, and others.

    - Q1 GDP – will beat expectations. Year will be >3.5%.
    - Financials will be the key earnings “beat” in Q1. Credit losses will have dropped. Cycle over. We can already see this in financial stock prices, which are the best YTD (regionals up 20-40%).
    - Unemployment will be 2% lower in 1 year, sub 8%.
    - SPX will “beat” expected $80/shr in earnings. Stocks will be easily 1300+ in 1 year. Upside is significant.

    This is what a RECOVERY looks like — jobs lag, tax receipts lag every single time. Sometimes I feel like you guys think I’m saying… “Its great, Its 1999! The SPX should be at 2,500!”. That is very different from “recovery looks intact, SPX will return to highs over next 2-yrs, great reward/risk on financial assets especially stocks, ZIRP works over time”.

    I guess because I work in this business my basic predisposition is to focus on 3-6 months out, and ask — “does it look better”? Sure, right now its tough. Joblessness, credit contraction is tough. In fact “the trough” feels the toughest… even with a bit of a lag. But if you look forward… trajectory is good. Recovery is highly self-reinforcing.

  18. JSchmid says:

    There will be no long term bull when unemployment stays at 10% and our government continues to make being unemployed more comfortable. Those 10% will be selling assets and spending less reducing the overall economy not to mention the ever growing number of people dropping out of the workforce completely.

  19. cognos says:


    Thanks Rootless, nice comment since we’re both on the “falsifiable” issue — in opposing views.

    If we get <2% GDP growth this year then I'm clearly somewhat wrong. If earnings were to "miss" from companies broadly for a Q in 2010 (doesnt really happen without an "event"). If some sort of uptick in credit losses caused a new banking crisis… I'm wrong, etc.

    See, I find many of the pessimistic comment wierd. The whole notion of a "double dip" means that were currently in an uptrend. Yet pessimists among us… dont even admit that. ("its ALL bad!"). Or every once in a while Franklin411 points back to a 1-year old thread — SAME VIEWS. If you dont see the positive indications over the last year (leading indicators — best run since the early 80s)… you'll never see it. I DID NOT see pessimists (prof or amateur) saying — "your going to see 5.9% GDP in Q4, earnings growth will be 30-70% next year, CRE will not be a major issues… BUT here's why things will structurally "double-dip" 1-2 years out."

    They DID NOT say anything like that… so far, that perspective has been dead wrong. Yet they cling to it.

  20. cognos says:

    Plus… I’ll just add 1 more thing:

    Its nearly IMPOSSIBLE to miss as badly on the bullish call as the bears missed 1-yr ago. Its roughly 100% returns to risk. That is AS BAD as miss as one can EVER have. That’s a “Dow 36,000″ caliber miss. Its a “real estate doesnt go down” caliber miss.

    And its gonna compound from here.

  21. JSchmid says:

    Jim Kramer predicted the Q4 bull run early in the year. At that point he wasn’t sure how long it would run but you could tell that with most people not able to research more than 1 year of history …. everything would look GREAT especially YoY! and the businesses would start to be less pessimistic also (stop reducing inventories & stop laying people off)

  22. Marcus Aurelius says:

    That 100% “gain” is not across the board and still does not offset the preceding loss (not to mention the fact that the federal government stole from my progeny to float your gains in this market). The banks, and thus (and criminally) the government, are still insolvent.

  23. dead hobo says:


    Yes, a floor is forming and some sectors have a pulse. I don’t think a major collapse is coming any longer. The Fed will prevent it using one form of liquidity or another. Capital gains taxes and a wealth effect are the only thing that fiscal policy has going for it at this time and the line has likely been drawn. My mistake of before was believing that a permanent fix was not in and being rationalized as a necessity.

    Too many companies made their numbers on cost cutting and not top line growth. Too many consumers have cut back to expect a big help in consumer numbers. Cities and states are just beginning their cut backs. A non elderly buy and hold person will probably live long enough to see a gain even at these levels if they hold long enough. I prefer to buy dips and trade the tops since I don’t have the patience for buy and hold, plus dips always appear eventually. I’m not greedy and am not ego driven to make good calls all of the time. A lost profit is not a loss. Only a loss is a loss. I prefer to wait for sweet setups. Plus, it’s basically free money so even a small gain is pretty nice. In2007 I made 22% doing this.

    A profit not taken is not a profit, it’s only a fantasy. I have another relative who’s been the master of buy, hold, and lose it all for over a decade. My relative is incapable of taking profits and always loses a lot eventually. My relative is old and still working as a result, with Y2K and 2008 capital losses that will outlive him.

  24. Mannwich says:

    We are Japan redux, but on a bigger scale. The new “normal” is upon us. No crash (yet) but flat-line city with pockets of sectors doing fairly well (especially banker parasites) and others barely treading water. The Zombie Economy is here, folks. Get used to it.

  25. cognos says:

    Marcus Aurelius says — “That gain… still does not offset the preceeding loss.”

    Hmm… I disagree.

    Sure, if you just held index the whole time the index is still down. We all know this.

    BUT if you added risk at or near bottoms in Nov/Mar you could easily be up.
    BUT if you simple rebalanced your stock/bond mix annually you are probably up.
    BUT if you simply invested your savings on a quarterly average-in basis to maintain a stock/bond mix you are probably up.

    Dont forget the bond part of your portfolio has paid nice coupon every year AND the stock part pays 2-3% dividends. It funny how often I see an index chart that neglects dividends. MSFT has paid close to $100B in dividends.

  26. dead hobo says:

    Mannwich Says:
    March 16th, 2010 at 1:43 pm

    We are Japan redux, but on a bigger scale. The new “normal” is upon us. No crash (yet) but flat-line city with pockets of sectors doing fairly well (especially banker parasites) and others barely treading water. The Zombie Economy is here, folks. Get used to it.

    Agreed. The Fed will probably be as liquid as the BOJ, but do it creatively. The real economy will only parallel the market enough to keep the fantasy of a living and functional equities market alive and flowing.

  27. dead hobo says:

    cognos Says:

    …Trading fantasy crapola…

    In 2007 I made and kept 22% gains. I sold out in 11/2007. I bought back in in 2008 (accepting bad advice) but got out early due to the need to conserve capital for personal reasons not connected to the market. All in all, I lost about 3/4 of the 2007 gain. I’m still far better off than most who subscribe to this blog., even having missed most of 2009. Probably even you.

  28. Mannwich says:

    @dead hobo: And it will likely be enough to keep any discernible social strife from spilling over into the public (for a while, as long as the unemployment checks and other safety nets stay intact). The key for those in charge to keeping a lid on things will be to keep any of that hidden from view.

  29. cognos says:

    dead hobo –

    you completely miss the point. the point isnt “trade to be up”. the point IS think more realistically about what an “investment” portfolio looks like. It doesnt look like the S&P index.

    1 — It has stock & BONDs. Bonds have done well. Especally LT govt bonds. John Bogle wrote a piece at year-end 2008 where he said, “I follow the simple rule ‘to invest your age in bonds’ and since I’m 72 this year my portfolio finishes 2008 down 2%”. Or something like that.

    2 — It has savings contributed periodically. Most people are not some day-trader or wealthy retiree trying to manage his/her portfolio monthly. Jobs create savings which gets added monthly and yearly. Thus fluctuating prices cause some periods Q1 2009 where money is ADDED near lows. Plus you have the incremental increases from savings. Fidelity noted that 401k balances they hold reached new all-time highs in Sept 2009.

    3 — Professional investors re-balance. They hold a policy mix… say 60% equities 40% bonds. Then after 2008 they hold $36 equity (-40%) and $44 bonds. Say they add $5 so the new total is $85. Now they re-allocate $15 to equity in the rebalance.

    My point is to think about a simple portfolio dynamic… on this basis many portfolios are doing quite well.

  30. JSchmid says:

    Obama Aides See ‘Extended Period’ of Unemployment

    Christopher Rupkey, chief financial economist at Bank of Tokyo Mitsubishi UFJ Ltd. in New York said today “right now the message is that there is not a lot to be hopeful about,” “Warning about a slow jobless recovery can help make it a reality.”


  31. dead hobo says:

    cognos Says:
    March 16th, 2010 at 2:05 pm

    My point is to think about a simple portfolio dynamic… on this basis many portfolios are doing quite well.

    Horseshit. Anyone holding at S&P 1550 is still about 34% under water even now. I’m half that and I’m sneering the big sneer at you. How’s that re-balancing working for you? I prefer folding money. And I don’t even have to talk all investmenty to make money and, what’ even better, I’M BACK!!

  32. cognos says:

    good luck with your “folding money”.

    as the real Kramer said… “you put the big bills on the outside”.
    to which Jerry said…”that’s a five!”

  33. dead hobo says:

    Cognos Says:
    March 16th, 2010 at 2:30 pm

    good luck with your “folding money”.

    I buy things with my folding money and live quite well as a result of having a pile of it.

    And what is it that you use, or you such a degenerate gamb*ler that cashing out is unthinkable? Or is this just some sell side crapola that you hope some dumbass will think is a great idea so you can keep the commissions rolling in? You probably know my old, still affluent but still working relative who is incapable of taking a profit, but has a great tax asset to draw off of. (HA HA)

  34. [...] my association with the Bear camp, and my belief that we are most likely in a long term secular bear market, I actually am an optimistic [...]

  35. rileyx67 says:

    Thought the point of this was that we may well be in a Secular Bear Market, (to which I agree) with a number of years to go…though none of the comments seem interested in that. Those noting the shaded areas as being arbitrary might run a chart of the DOW from ’65 to 8/82 and see what the last Secular Bear looked like, and though virtually all of my money is with Vanguard, that chart will belie John Bogle’s advice of Buy and Hold index funds, except for the Secular Bull periods! We CAN do well in such, due the Cyclical bulls and bears within, but only through dividends (sparse now), diversification into bonds, and ACTIVE equities selection and timing by ourselves (?) or the 10 or 20 % of high Alpha managers, which is what I have been relying upon, and has been working well.

  36. Mr.E. says:

    cognos said: “That chart with the shaded regions could not be more arbitrary.”


    I don’t know that it’s arbitrary, but I don’t know how the bull vs bear periods were determined. A source of long-term classifications of secular markets I respect is Ed Easterling / Crestmont Research. His characterizations are available here:


    1901-1920 Bear 20 years
    1921-1928 Bull 8 years
    1929-1932 Bear 4 years
    1933-1936 Bull 4 years
    1937-1941 Bear 5 years
    1942-1965 Bull 24 years
    1966-1981 Bear 16 years
    1982-1999 Bull 18 years
    2000-? Bear

  37. [...] sur le lien)   -et le commentaire de Big Picture:   http://www.ritholtz.com/blog/2010/03/the-hibernating-bear/ (cliquez sur le lien)     Notre position ici mème c’est qu’il s’agit [...]

  38. smartaleck says:

    Barry…..you told us you were hedging some bets by buying QID and SDS [around 23 and 43]…are you still long these hedges…Thanks…