Author Topic: Are bear markets a thing of the past?  (Read 1802 times)

RogerOS

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Are bear markets a thing of the past?
« on: August 12, 2020, 11:35:32 PM »
Since the 2008 financial crisis the Fed has been turning on its money printers every time the economy dips. The real economy aside, the effect on the stock market has been positive. With companies now more indebted than ever it seems the Fed really has only 1 of 2 options:

- Continue QE and hope for the best. Ballooning financial markets seem likely. Hopefully no stagflation.
- Purposely ending QE with the purpose of decreasing debt levels in the long term and likely a debt crisis in the short term. Seems highly unlikely as unemployment will rise and high employment is one of the Fed's main objectives.

Given this, are (prolonged) bear markets a thing of the past? (I know the covid market dipped may be considered a bear market, but it was extremely short due to the Feds intervention)

appleshampooid

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Re: Are bear markets a thing of the past?
« Reply #1 on: August 13, 2020, 01:48:09 PM »
In addition to QE, it seems the feds have given every indication that they are going to bail out any and everyone in the face of any prolonged crisis. It's almost like it's impossible for big public companies to fail these days, which IMO is one of the reasons the markets continue UP AND TO THE LEFT despite the dismal GDP and unemployment numbers.

utaca

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Re: Are bear markets a thing of the past?
« Reply #2 on: August 13, 2020, 03:51:09 PM »
Interesting conversation starter - I'm here for the fireworks!

sixwings

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Re: Are bear markets a thing of the past?
« Reply #3 on: August 14, 2020, 09:21:37 AM »
Beyond the fed, a tech based economy is IMO far more resilient to shocks. 10 years ago a covid stop would have wiped everyone out, but a lot of companies experience a short dip in productivity as they switched to remote work or invested in tech to enable more social distancing and kept on going.

dividendman

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Re: Are bear markets a thing of the past?
« Reply #4 on: August 14, 2020, 10:40:56 AM »
Hah... a thing of the past... by that you mean 5 months ago? :)

I think they'll happen again. In real dollars they'll definitely happen even if inflation goes crazy. But I think it'll happen in nominal dollars too.

marcus_aurelius

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Re: Are bear markets a thing of the past?
« Reply #5 on: August 14, 2020, 11:59:59 AM »
IMO, as long as human psychology stays the same, with constant give and take between greed and fear, bear markets and bull markets will be with us. QE and network effects for mega tech companies may tweak things but the underlying human qualities that drive the stock market are unchanged.

ChpBstrd

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Re: Are bear markets a thing of the past?
« Reply #6 on: August 14, 2020, 12:53:52 PM »
So far the US is running the Japanese playbook from circa 1991. Run up an enormous national debt with no realistic prospects of repayment. Capitalize failing and over-leveraged domestic firms that are politically favored. Restrict immigration and use subsidies to run up the cost of housing so high that people stop having babies and the population grays (the U.S. now has a similar percentage of its population over 65 as Japan did in 1990). Print yen dollars like mad in an attempt to keep the disinflationary pressures from causing a depression - and to fund the government.

Yet even that approach has its ups and downs. The Nikkei 225 has been a very bumpy ride to nowhere since 1991.

https://www.marketwatch.com/investing/index/nik/charts?countrycode=jp

The endpoint is an empty shell of a country, financially and demographically, but at least one generation got to enjoy low taxes.

Buffaloski Boris

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Re: Are bear markets a thing of the past?
« Reply #7 on: August 14, 2020, 07:16:52 PM »
In answer to the OP's question, I don't think that bear markets have gone away, although I think it's obvious that they will be shorter in the future.  I think the GFC was a great learning experience for both  the Fed and the Treasury.  Keeping in mind that their mandate is to protect the financial interests of the elites. They saw during the GFC that they could shamelessly pump money into the financial sector to prop it up while ignoring the financial straits of the general public and pretty much get away with it. So this time we saw a very fast rescue of financial markets, the impact and timing being much faster than I expected.  The lessons were well learned.  You can expect the next "crisis" to hit the financial sector to be resolved PDQ. 

Now from a long term investment perspective, I think the comments of @ChpBstrd above are cogent.  The US appears to be heading down a similar path  to Japan.  Compared to the rest of the industrialized world, I'm fairly bearish on the US as a long term investment.       

sixwings

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Re: Are bear markets a thing of the past?
« Reply #8 on: August 15, 2020, 08:32:38 AM »
i'm still pretty bullish on the US as the market becomes more tech driven. The S&P500 is becoming more and more a big tech index and I dont think a lot of the old economic theories and fundamentals holds for mega tech co's. the US tech industry is the most innovative in the world and i don't really see that changing.

Buffaloski Boris

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Re: Are bear markets a thing of the past?
« Reply #9 on: August 15, 2020, 04:03:50 PM »
i'm still pretty bullish on the US as the market becomes more tech driven. The S&P500 is becoming more and more a big tech index and I dont think a lot of the old economic theories and fundamentals holds for mega tech co's. the US tech industry is the most innovative in the world and i don't really see that changing.
A lot of that tech advantage has been priced in 15 ways to Tuesday and at the most favorable of assumptions. I wouldn’t and don’t bet on that being a huge factor in the future. YMMV.

RogerOS

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Re: Are bear markets a thing of the past?
« Reply #10 on: August 16, 2020, 11:59:57 AM »
Hah... a thing of the past... by that you mean 5 months ago? :)

Haha, maybe I should have emphasized the 'prolonged ';)

Thanks for the replies. I think the current situation is unprecedented (is it ever) and no one really knows. It will be interesting to see if the US will follow Japan. I hope not, but time will tell :)

sixwings

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Re: Are bear markets a thing of the past?
« Reply #11 on: August 17, 2020, 11:14:01 AM »
i'm still pretty bullish on the US as the market becomes more tech driven. The S&P500 is becoming more and more a big tech index and I dont think a lot of the old economic theories and fundamentals holds for mega tech co's. the US tech industry is the most innovative in the world and i don't really see that changing.
A lot of that tech advantage has been priced in 15 ways to Tuesday and at the most favorable of assumptions. I wouldn’t and don’t bet on that being a huge factor in the future. YMMV.

I very much disagree. I don't think the tech advantage can really be priced in. Future tech innovations and the growth it will create cannot really be priced in. The growth of the smart phone was not priced into the market in 2007, the growth of the ipad and tablets was not priced in, tech disrupts and creates new markets and growth in old markets during times of uncertainty and change and that's impossible for the market to price in. IMO, a recession is an opportunity for tech growth not contraction and slow recovery. We saw it with covid, while traditional companies were shutting down tech companies like zoom and others exploded in market share and revenues, Amazon basically took over all retail for 3 months, facebook users increased etc.

Paper Chaser

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Re: Are bear markets a thing of the past?
« Reply #12 on: August 19, 2020, 05:53:45 AM »
Yesterday's close confirmed that it was officially the shortest bear market in history...

hodedofome

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Re: Are bear markets a thing of the past?
« Reply #13 on: August 19, 2020, 10:09:24 AM »
Yesterday's close confirmed that it was officially the shortest bear market in history...

The fastest bear market in history followed by the fastest recovery. Nobody thought it was possible, but here we are.

hodedofome

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Re: Are bear markets a thing of the past?
« Reply #14 on: August 19, 2020, 10:22:06 AM »
So far the US is running the Japanese playbook from circa 1991. Run up an enormous national debt with no realistic prospects of repayment. Capitalize failing and over-leveraged domestic firms that are politically favored. Restrict immigration and use subsidies to run up the cost of housing so high that people stop having babies and the population grays (the U.S. now has a similar percentage of its population over 65 as Japan did in 1990). Print yen dollars like mad in an attempt to keep the disinflationary pressures from causing a depression - and to fund the government.

Yet even that approach has its ups and downs. The Nikkei 225 has been a very bumpy ride to nowhere since 1991.

https://www.marketwatch.com/investing/index/nik/charts?countrycode=jp

The endpoint is an empty shell of a country, financially and demographically, but at least one generation got to enjoy low taxes.

Big difference between US and Japan - their bubble was much bigger in 1990 than the US is today. I think the Nikkei 225 PE was 80 or something like that. So prices had to come down no matter what. Their shrinking population has been a double whammy, and they just can't grow themselves out of the deflationary spiral, even though they are printing money like crazy.

As long as the US continues to keep it's borders open and bring in immigrants, our economy should not turn out like Japan. And if tech automation increases production above human labor, that will only help matters.

We start to shrink our population and we'll be in a world of hurt (unless automation picks up the slack). For sure.

I am glad I won't be living when work population is shrinking. My grandkids will have to figure out how to grow their savings in a shrinking world. Gonna be tough.