Are The Bears Emerging From Hibernation?

interesting points for sure, but just know there's always people out there looking for airtime. this guy doesn't run money, he sells books, so keep in mind his incentive for having a strong opinion one way or the other. also notice he doesn't specifically recommend any trades in there, just lists possible reasons that we might have a correction this month, doesn't sound very high conviction. if he had said "and because of this, I'm moving 50% of my stocks to gold, cash, and short term corps," I'd have a little more respect. the skeptic in me has a tough time listening to anyone who doesn't actually run money.

but onto his arguments, he makes some good points, but he mixes two very different things: a correction & a bear market. if we get a 10% decline because of bad earnings and then pop right back up before Christmas, that's a very different thing than if we see 25-40% declines over 3-6 months. 10% hiccups are common, we've had 3 in the past 15 months, we'll continue to see them. he says the next stop is likely a bear, and then says look out for 8-10% declines. that's not a bear market, that's a minor correction. if those freak you out, you need help.

bull markets don't die of old age, and I've seen the argument made that we're not actually in a bull market, we're in a secular bear, much like the mid 60s-early 80s. the S&P has only doubled from its highs in summer 2000, and that's over 16 years, and a little better than 4% per year including dividends. I would like to ask the author: what's more likely, that we see 16 more years of sub 5% returns? or, that we see a return to the 80s and 90s, and "underperformance" is getting less than 10% per year? I don't know the answer to that, but I do know that recency bias is a big issue, and while I have my doubts that we can get back to 80s and 90s growth, history tells us that we have long secular cycles of expansion and contraction/slow growth, so just because we've been in a sideways market recently, doesn't mean we'll always be in a sideways market.

also, the investment advice about moving to cash (assuming he means 100% cash or something close) is absolutely awful. sure, if you're seth klarman, you can hold 50% cash and still compound money in the teens or 20s annualized, but none of us are klarman. the problem with this strategy is it only works in hindsight, like this: "man, if I just bailed out in sept 2007 and got in march 2009..." the bull market was still going on in 2007, and most hedge fund managers saw signs of cracks in the economy as early as 2005, but if you bailed out then, you missed out on great gains, and very few people backed the truck up in march 2009. many were early, a group I used to work for invested a good bit in october 2008, but had to deal with the fear of a wrong thesis for the next 5 months as their purchases fell further. thankfully they held onto some cash and invested more in february 2009, about 2 weeks before the bottom, but at the time, they had no idea they were right, all they knew is that valuations looked good. that's why I sound like a broken record, look at valuations, but only add/reduce cash within reason.

that's the toughest part about investing, the emotional aspect of it. if you bail out to cash, you want to get back in, it's human nature, but you always have this fear of buying back in at the wrong time, so you delay, waiting for the "perfect" opportunity. was my former team "wrong" for buying in 2008? I don't think so, but at the time, clients may have felt that way, and if you look at history, it wasn't the "perfect" time to buy. as Howard Marks said (I forget if it was February of this year or after Brexit), "now is not THE time to buy, but it is A time to buy." do not EVER go to 100% cash, "cash out" like this guy says (whatever the hell that means), or take an overly conservative stance across an entire asset class. assuming you're young (under 50), you have time to make up any losses, so even if your money declines by 30-60%, you should have cash on hand to pick up bargains, and time on your side to ride out the storm. anyone who defends bailing out of the market entirely is an idiot. even in the late 90s, the most outrageous valuations we've ever seen, there were still bargains to be had.

in another thread I made my investment views very clear: mostly invested (70-90%), remainder in cash or short term bonds to pick up more stocks when things do inevitably fall.

in several other threads I've made my stance on prognosticators clear: don't trust the media, and don't trust the investment advice of anyone who doesn't run money.