A bear market is when the stock market falls for an extended period of time. The fall is usually around 20% and is the opposite of a bull market. A bear market is caused by the decline in stock prices which are directly influenced by a decrease in company profits. Falling stock prices can also be a correction of over valued stock.
When stocks become to expensive they will eventually fall to a more reasonable price. The decline stock market is further perpetuated by scared investors who will sell their stocks at the first sign of decrease stock prices and the cycle continues. For example the bear market during thw 1970s went on for over a decade when stocks went sideways. It was experiences like that which cause people to move away from day and active trading into more low risk investments. This is when the popularity of bonds and mutual funds began.
A bear market will cause your stocks to drop in price. The decrease in their value can happen extremely quickly or gradually over time. Both lead to the same conclusion that your quote value of a stock is actually lower. However, a bear market is only bad if you plan on selling your stock immediately or you simply need the money. Investments are really meant to be long term. If stocks prices drop all you need to do is wait for them to increase again. In fact bear markets, falling stock prices, and depressive markets are important to the success of the long term investor. Bear markets offer an opportunity to buy cheap stocks.
If you have the ability, financial basis, and the patience to wait a decade or more for your profit, bear markets are extremely important to you. Financial advisors will often tell their clients to sell their stocks when market prices fall but this is clearly a bad move. Financial advisor usually offer this kind of advice to appease an investor concerns and uphold their own reputation. In other word financial experts do not know everything, use your own judgment.
Investing money in a bear market is not rocket science but it can be tricky. You need to look for companies and funds that have the future potential to make you money 20 years from now. This is hard to do, since future predictability is impossible. However, you can use common sense. Gillette razors and coke product stock may fail 40% today in the future people are still going to buy both. The important point here is to not to couple stock price with business. Just because a stock price falls does not mean that a company is going under. As mentioned above it may just be a stock market correction.
If you can take a deep breath and have confidence you will realize that a bear market and falling stock prices is a good thing. It is like clearance sale on stocks, and suddenly companies which were out of your reach can be afforded. Everything in the universe including the stock market will find and maintain balance ? thus bringing those falling stocks back up to reasonable price.
Bull Or Bear Market
"This is a tough market to navigate. On the one hand the world economy is a mess and completely imbalanced. Half of the world is too dependent on exports (mostly Asia) and the other half (US and parts of Europe) is in a dream world believing that they can consume more than they can produce, can pile up almost unimaginably high debt levels and can live happily ever after."
"On the other hand, whenever the natural market forces begin to remedy this nightmarish state, governments step in to halt the corrective process, ultimately making matters worse and pushing the day of reckoning a little further on down the road. But in the meantime, stocks can rise from the inflationary push."
Can you feel it in the air...?
The mood is slowly changing to a more optimistic one.
Living in Florida as I do, you get your share of hurricanes. Thankfully, most of them miss us, but in 2004 it was a different story. I sat in my home during Hurricane Charlie and watched it tear up the town and turn out the lights.
The television showed in real time the hurricane moving closer and closer. I couldn't see what all the fuss was about... but then, BOOM. It was like being hit with a sledgehammer as the outer layers of the storm lashed into us.
Then it was gone, leaving devastation in its wake.
Then the surreal part comes; when you're sitting in the eye of the hurricane. It's perfectly calm all of a sudden and it's tempting to sit outside even. Relief sets in and your stomach unties itself.
But of course, the calm is short-lived. As the eye of the storm passes, the outer layers pass over and usually, they're more severe than the first assault.
We're in such an eye of the storm now- the greatest financial storm in history.
We'll get to the good news in a second but let me first be very clear about something I've concluded this week:
This is the coldest, most powerful, most sinister bear market ever.
Hurricane Andrew. Hurricane Katrina. Extinction-level events for those in its path.
It wants to kill us all- even those of us who embrace it by buying gold.
Remember: A bull market wants to go up with the LEAST amount of people on its back. A bear market wants to go down with the MOST amount of people on its back.
The bulls and bears use trickery to achieve this. Both of them do what people least expect right at the time when people had given up on them.
Until now, most people had written off this latest rally. Now, they're waking up to the idea.
The market action recently was instructive and shows me the bear is doing its job by catching everyone out. We've even had big up days on the last day of the week. Usually, there's a sell-off on the last day of the week because nervous traders don't want to have any open positions over the weekend in case of bad news that may come and it didn't happen this week, so that's a real positive.
As we go into earnings season, it won't be a clear path upwards, but I see a steady rise in the market from here. As it gathers steam, more and more people will say that the bear is dead and everything is okay now.
That's how we've been conditioned, right?
Any time in the past that there's been a financial crisis, the Fed steps in and makes it better. Before long everything is back to normal. Asian crisis 1998, 9/11, 2002 recession.
So people will expect the same this time. So far, it's a re-run of 1929 to 1932. The real damage came after the so-called great crash in 1929- when everyone thought it was over.
The bear is in charge, but he disguises himself as a bull. Right at the time when even I start to doubt he's a bear, he'll take off his mask and go for the final kill. The aim is to take the most people down.
Before that though, he'll have persuaded anyone who thought it was a no-brainer to buy gold in light of the Fed printing money to dump the yellow metal. The price of gold should now sink as the market rises. As I said, he wants to kill us all.
If investing was truly a no-brainer, everyone would be rich.
So, once again, I prepare to be the lonely crank who doesn't join in with the herd.
In the gold market on the other hand, the bull is in control. And he disguises himself as a bear to go up with the least amount of people.
There simply is no question that the Fed will ultimately cause rapid and dramatic inflation and gold will rise to over $2,000 an ounce. But in the meantime, look out below. Buying opportunities lie ahead. Would I sell gold then? No. That's precisely what the market wants.
Expect the unexpected... and bet on it!
Back in the 1970s there was a major correction in gold, just before gold went parabolic, and I'm wondering whether history is ready to repeat.
What I see ahead is a temporary stabilization in house prices this Summer. This could really spark a surge upwards, especially in banking stocks.
So what will ultimately spoil this party?
Unemployment. This is setting in heavily now and it's worse than the numbers appear on the surface.
You see, it all depends on your definition of 'unemployment' and surprise, surprise, the government's definition paints a rosier picture than reality...
The numbers don't include 'discouraged workers'- people who've been unemployed for over a year and have given up looking for work. The poor guy's still unemployed though!
Also, if you get made redundant from a full-time job and then get a part-time job (as it's all you can get!), then you don't count as unemployed. BUT, your income now sure makes you feel like you're unemployed!
So, is the government hiding the true unemployment figure? No, but they certainly don't publicize it. The real figure is a shocking 15.6% unemployment!
Meanwhile, I thought I'd review some things I'd mentioned before...
Cocoa. It's recent parabolic rise and that one could bet the price would go down, the price did indeed collapse so a tasty profit there. The world can turn without chocolate...
Oil is hovering around $50 despite all the people saying it was headed south to $25. It may go higher.
The yen fell and continues to fall since I mentioned the likeliness of this event.
Gold and silver- already discussed. Your nerves are about to be tested here, I feel.
Wheat and corn. Nicely up, but as in oil, time for gain-locks.
If I wanted to play this stock market rally I would look at bombed out financials- particularly if they've been guaranteed not to fail by the government. Some of these banks are now saying they don't need any more bail out money.
So, the adventure continues. Maybe soon, people won't be so frightened to open their 401k statements when they arrive in the mail. I wish I could tell them when that time comes that it's probably a false dawn and that this is merely a chance to get out of the bear's way.
Both Mika Hamilton & Mark Patricks are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Mika Hamilton has sinced written about articles on various topics from Investments, Banking and Bear Stock Market. More Articles & Tutorials and a Free Investing For Beginners E-Course at. Mika Hamilton's top article generates over 90500 views. Bookmark Mika Hamilton to your Favourites.
Mark Patricks has sinced written about articles on various topics from Bear Stock Market, Finances and Politics. Mark Patricks is an author, publisher, and businessman. You can read his weekly writings in Freedom by Friday a newsletter published by the Lea. Mark Patricks's top article generates over 1900 views. Bookmark Mark Patricks to your Favourites.