The big bad bear is stirring again. So far he has stretched, yawned and peaked out of his cave. After his almost year-long nap he is hungry. A nice big steak would hit the spot.
That steak comes from cattle and not too far from his den there is a fat complacent bull munching in the pasture. He has his tail towards the bear and Mr. Bear remembers that 3 years ago he walked up to another bull and bit him in the backside. It looks like he can do it again.
We know who bull and bear really are. It seems that almost everyone is bullish and thinks we are in another bull market like the one in 1999 where all investors thought they were geniuses. History has 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 years in 2000. Can we expect an 18-year bear market? If history repeats its cycle the answer is yes.
The recent return of the upward movement of stock prices from last year is very typical of rallies in bear markets. Many have a 50% retracement of the first down leg (as happened after the big break in 1929) that tops out with the resumption of the downward path.
Today our bull is feeding on the lowest interest rates in 40 years, a tax cut that puts extra money in the hands of consumers (where it belongs) and a strong housing market plus the belief that the market always does well in an election year. Let's hope all these things will come to pass.
The worst problem for investors is their complacency. They start making money and forget to protect their profits. These slip away when the market starts down and their broker says, "Don't worry. The market always comes back". If the investor did not learn to protect his assets from the 2000 debacle he is doomed to lose again. What should he do?
He should protect his investment account with stop-loss orders on all stocks and mental stops for all mutual funds. Brokers hate this and will try to talk their clients out of doing it. Why? Because he makes a commission as long as you are invested and nothing if you have cash in your money market.
It is better to make 1% in a money market than lose 20% or more of the principle as the market heads south. You don't have to be a market "expert" to place a stop. Decide how much risk you are will to take 5%, 10%, 15%? And place your stop accordingly.
When this bear comes out of his cave don't let him bite you ? you know where.
Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.
Copyright 2005
Oswego taxi to Midway ..Every day I hear from the "experts" on CNBC-TV and... Read More
Just about now everyone is confused as to which way... Read More
Well maybe that's overstating it a little, but it's certainly... Read More
Caught in a whirlpool and being sucked under. No life... Read More
In November of 2000 when the NASDAQ was trading at... Read More
Right now there doesn't seem to be any "gold fever".... Read More
THERE'S SOMETHING TO BE SAID FOR standing firm in the... Read More
The ABC's of Stock Trading SuccessStock trading success...why is it... Read More
With all the bad news that has been dumped upon... Read More
Sometime in the third quarter of 1997, someone told me... Read More
It depends on your level of understanding of the market... Read More
First let's see what protectionism is. According to Mr. Webster... Read More
Most stock market traders have a favorite technical indicator.The one... Read More
Any online investor / trader seeks an excellent off or... Read More
I use the P/E ratio as a secondary indicator for... Read More
If you have talked to a stock broker or financial... Read More
Investing in long-term financial vehicles give you the most gains... Read More
Now where have I heard that before? I know. It... Read More
What account size do I need?How much money can I... Read More
How do you invest? What do you really pay? At... Read More
Because you don't feel too sure about which stock or... Read More
Every day I hear someone on CNBC proclaim that "this... Read More
Ever have one of those sample boxes of candy? Each... Read More
The trash business in its efforts to cook their books... Read More
Since I can remember, and that's a long time ago,... Read More
shuttle from Midway Morris ..The single most expensive stock market trades are those made... Read More
Who are the successful investors?There are those who follow the... Read More
Just 30 years ago the stock market was a shadow... Read More
How many times has this happened to you? You're at... Read More
The fight continues to rage among traders who use technical... Read More
It depends on your level of understanding of the market... Read More
Inverted interest rates? What's that? Who cares? Even if you... Read More
I mean it when I say that. While plastic silverware... Read More
Time to look back2004 is over, now we are in... Read More
It takes a total mental commitment to the task. It... Read More
TOO OFTEN, INVESTORS SIMPLY CHOOSE TO follow the crowd. This... Read More
If there is one term over-used when talking about making... Read More
There is so much involved in developing peak performance, that... Read More
Look back over the years and try to remember how... Read More
You may have wondered why your mutual funds have been... Read More
If you have been watching the stock market at all... Read More
This article describes the model of a natural relationship between... Read More
I am taking the time to help others learn the... Read More
I was devastated!I just couldn't believe it. I was 10... Read More
A few years back ? it seems like an eternity... Read More
Having lived aboard a sailboat for 2 years I was... Read More
If you're a normal human being, your need to feel... Read More
With the stock market stubbornly refusing to settle down and... Read More
Have you bought any mutual funds this year or late... Read More
Caught in a whirlpool and being sucked under. No life... Read More
Stocks & Mutual Fund |