Chart of the day: bear market history


Here are some charts from the latest issue of Barron’s. They have a readable article on bear markets (for those of you subscribed to it) as the Dow was down over 20% last week. That’s supposed to mark the beginning of a bear market as the chart below suggests.

First off, I have no clue why 20% is the official gauge of a bear market. It strikes me as kind of arbitrary. 10% down is a correction and 20% down is a bear market. Why? Isn’t 19.1% down a bear market?

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It’s sort of like 2 quarters of negative GDP ‘growth’ is supposed to be a recession. Since when is negative growth a term?

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I do think we are in a bear market… except it started in 2000. What we experienced after 2002 was the mother of all bear market rallies. It was a sucker’s rally induced by easy money. What I find aggravating about bear market rallies is that people buy into them. Everyone is looking for the bottom, so they can put the same trades on again. But, the drugs won’t work.

Take a look at my charts on the Nikkei and the Dow if you want to know what I mean by bear market allies.

What investors should be concerned about is preserving capital. A word to the wise.

The Bear’s Back, Barron’s (paid site), 7 Jul 2008

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