Thesis: "Current secular bear market is an opportunity."

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Thesis: "Current secular bear market is an opportunity."

Postby AppelSienSapFrietjes » Sat Jul 13, 2013 10:09 am

Hi all,

Yesterday, I was discussing with a friend about investing. He is very risk-averse and I was trying to convince him to look into investing in equities. I had a difficult time :). At some point, the concept of secular bull and bear markets came up.

My final argument was: Now is a golden time for young investors to add. Historically, there is a rotation between secular bull and bear markets. We have been for 13 years in a secular bear market. A new secular bull market might start today, tomorrow, next year, over 5 years, ..., but at least - and that was my point - we already had 13 years. The current secular bear market will not go on forever. If you are young, as we are (we are both 30), there is a big chance that a significant part of your early career will be in a secular bull market. This introduces a lot of investing opportunities, since you can expect an above-average return somewhere in the "near" future. Since this might overlap with the early stages of our career, it might be possible to early retire. In other words, we should invest as much as possible now. Not only because of the traditional reasons (compounding effect, ...), but also because of the change that a secular bull market might start somewhere "soon".

How do you feel about this statement? What is your opinion?

Thanks!
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Re: Thesis: "Current secular bear market is an opportunity."

Postby nisiprius » Sat Jul 13, 2013 10:27 am

I don't agree. You can't tell. I think "secular bull and bear markets" are patterns we see in data after the fact; shapes in clouds, faces in rocks, constellations in the sky.

I think that to the extent they do exist, they resemble fads and fashions and may well be driven simply by generational change as investors enter and leave the market. That is, they may be real but you cannot predict them any more than you can predict the future of the Broadway musical, the book, or sriracha sauce.

You should invest in stocks because in the past they have a pretty good return-for-risk profile over holding periods of several decades, not because you can guess whether the upcoming decades will be good or bad.

You should invest in stocks because there are a fairly convincing and straightforward reasons to think the amount of risk is reasonable as part of the portfolio of an ordinary retirement saver, as opposed to someone who embraces financial risk. One reason is that the U.S. will probably keep muddling through and businesses will probably keep making money and distributing it as dividends to shareholders. Another reason is that the amount investors are willing to pay for stocks factors in the risk, and since stocks are in fact riskier than bonds or cash, investors are willing to pay less and/or demand higher return.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby AppelSienSapFrietjes » Sat Jul 13, 2013 10:31 am

I 100% agree with you. The reasons you give are the main reason you should have to start investing.

My additional argument is that the current bear market is going on for 13 years and it will stop eventually, if you look at the history. This is something that could not have been said in 1999 for example. So, in my opinion, it is an extra argument that investing is interesting.

Thanks.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby gwrvmd » Sat Jul 13, 2013 10:35 am

Somehow Mr Market must have forgotten he was in your "secular bear market": he hit new highs last week...Gordon
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Re: Thesis: "Current secular bear market is an opportunity."

Postby AppelSienSapFrietjes » Sat Jul 13, 2013 10:37 am

gwrvmd wrote:Somehow Mr Market must have forgotten he was in your "secular bear market": he hit new highs last week...Gordon


I don't understand your point? It is not uncommon to hit highs in a secular bear market. Either, the secular bear market is over, or not. We don't know.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby livesoft » Sat Jul 13, 2013 10:51 am

I always laugh when I read the words "secular bear|bull market" because they are just BS. I think a "'secular bear market" is the same as a bull market and a "secular bull market" is the same as a bear market.

The word "secular" is justed added so that folks who predict a bear or bull market can always be right. That is, they predict a bear market for the next year, then when everything goes up, they report back, "I predicted a bear market last year and I was right: We've been in a secular bear market for the past year." Or they predict a bull market for the next year, then when everything goes down, they report back, "I predicted a bull market last year and I was right: We've been in a secular bull market for the past year."

The market goes up and down and it really doesn't matter what you call it. OK, it does matter if you use the trademarked RBD designation because that really means something very specific.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby nedsaid » Sat Jul 13, 2013 10:55 am

I actually agree that there is opportunity for young investors. The market has essentially been flat for 13 years. With the recent run-up we are probably a bit positive since then. And I agree that odds are good that we will be entering a secular bull market at some point soon.

The great bull market from 1982-2000 was not a figment of someone's imagination. It is not a Rohrsbach test where you see whatever you want to see. It really happened. I lived in it and invested during this period. Ditto for my comments about the market since 2000. No matter how you interpret the graphs, the market has essentially been flat maybe up a bit since 2000. I have not imagined this. I agree with Nisiprius that there was no way to have predicted these events in advance.

These things can be known only in retrospect. How will we know for sure that the secular bear market is over? Probably several years after it is over. New highs will be talked about as "bubbles" from people who forgot what a real bull market looks like. It will take a long time to convince people (including me) that we are in a secular bull.

I would also agree that the future is unknown. What I would say is that after a long period of depressed market performance that the odds for strong gains ahead are good. The longer the flat or depressed market, the higher the odds of a true bull market to follow. And higher odds of higher than normal gains.

Another thing to consider is that Price/Earnings ratios got down to about 8 after the previous secular bear from 1968-1982. Interest rates got up to the mid to high teens. So it was a once in a lifetime opportunity for both stock and bond investors. Now P/E's are about 15 when looking to estimated future earnings. Historically, P/E's range between 10 and 20. This time, interest rates are really, really low unlike 1982. So I think there is opportunity ahead but this is not 1982.

I know, I know. Isn't the market up 50% or so since 2008? Isn't that a bull market? My reply is that most of that was the recovery of the losses of the financial crisis. And yes, we are up from the previous 2007 highs. But my memories of the 2000-2002 and the 2008-2009 bear markets are pretty fresh. The "bull markets" we experienced since 2000 have mostly gotten us back to even.

So I think you are on the right track. At some point we will experience what you are looking forward to. No one knows when.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby gwrvmd » Sat Jul 13, 2013 10:58 am

Eventually you will learn that "secular bull market" and "secular bear market" are financial gibberish....Gordon
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Re: Thesis: "Current secular bear market is an opportunity."

Postby AppelSienSapFrietjes » Sat Jul 13, 2013 11:03 am

My point was not really about predicting/timing the future. Not at all.

My point is that is must be more reassuring to invest now than in 1999, if you look at the historic cycles of secular bear and bull markets. We have no idea what the future will bring, but we must feel a bit more confident about the future than in 1999. That is my point.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby nedsaid » Sat Jul 13, 2013 11:07 am

Amen and Amen.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby kenschmidt » Sat Jul 13, 2013 11:18 am

AppelSienSapFrietjes wrote:My point was not really about predicting/timing the future. Not at all.

My point is that is must be more reassuring to invest now than in 1999, if you look at the historic cycles of secular bear and bull markets. We have no idea what the future will bring, but we must feel a bit more confident about the future than in 1999. That is my point.


What is interesting to me is that the average person thinks exactly opposite of how you state above. People were all gung-ho on stocks in 1999, which in (completely unpredictable) retrospect was not a good time at all. When people's stomachs turned at the thought of stocks in 2002 or 2009, it turned out to be a pretty good time - again, in retrospect. It is not outside the realm of possibilities that stocks could have gone down further and stayed down in 2009.

If you are a young investor, you don't have to worry so much about whether it is a good time or a bad time. First, you don't know anyway and second, you will get the chance to invest through many market cycles real or imagined in your lifetime.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby Calm Man » Sat Jul 13, 2013 11:29 am

OP, you are well meaning but I suggest you not advise people on market cycles. The stock market is at an all time high. How you can call that as part of a secular bear market is beyond me. I could give you the proper definitions of what a bear market rally is (I think that is what you think we are in now) but you will likely learn it better on your own. Good luck and be careful about advising others what to do.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby nedsaid » Sat Jul 13, 2013 11:31 am

A skeptic could say, "Okay, in 2000 the P/E was 34 and now it is 15. It has a long time to go to 8 as it did in the previous secular bear."

But still the odds are better with a P/E of 15 than 34.

So just keep investing.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby AppelSienSapFrietjes » Sat Jul 13, 2013 11:45 am

kenschmidt wrote:
AppelSienSapFrietjes wrote:My point was not really about predicting/timing the future. Not at all.

My point is that is must be more reassuring to invest now than in 1999, if you look at the historic cycles of secular bear and bull markets. We have no idea what the future will bring, but we must feel a bit more confident about the future than in 1999. That is my point.


What is interesting to me is that the average person thinks exactly opposite of how you state above. People were all gung-ho on stocks in 1999, which in (completely unpredictable) retrospect was not a good time at all. When people's stomachs turned at the thought of stocks in 2002 or 2009, it turned out to be a pretty good time - again, in retrospect. It is not outside the realm of possibilities that stocks could have gone down further and stayed down in 2009.


This is exactly my point. If I had the same discussion with my friend in a 1999-situation (that is, markets of 99 but still age of 30), I would probably have to convince my friend to not to be too optimistic about equities. I would NOT say that equities will be a dead game for next decade(s), as I don't know the future, but I would say that the chances that the secular bull market must stop sometimes.

Upside down, I am saying the opposite now in 2013. I still don't know the future, but I feel more confident than in 1999.

You can replace 1999 by 1995 (or something else) in the text above. It is not about market timing. It is about confidence with respect to history of cycles of secular bear/bull markets.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby AppelSienSapFrietjes » Sat Jul 13, 2013 11:50 am

Calm Man wrote:OP, you are well meaning but I suggest you not advise people on market cycles. The stock market is at an all time high. How you can call that as part of a secular bear market is beyond me. I could give you the proper definitions of what a bear market rally is (I think that is what you think we are in now) but you will likely learn it better on your own. Good luck and be careful about advising others what to do.


I 100% agree. I am really hesitating when it comes to giving advice. I always try to articulate that I am showing confidence or not. Actually, I never give advice, as I recently started out with investing and know nothing. My post history will tell you that. That said, I believe that having confidence is very important for a investor. If you have confidence, the chance that you stick with your plan in bad times, is much higher. And we all know that sticking with your initial plan is key. Maybe THE key.

Please also note that I am talking about secular market trends, not single market trends. Yes, I know we are in a bull market in the last years, but looking back to 2000, we are still in a secular bear market. It might be over, or not. We will know in the next decade(s) when we can look back.

(By the way, I am not native English, I hope I make myself clear.)
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Re: Thesis: "Current secular bear market is an opportunity."

Postby Sidney » Sat Jul 13, 2013 11:54 am

Calm Man wrote:OP, you are well meaning but I suggest you not advise people on market cycles.

I never offer investing advice to friends/family except if they are asking about what to read. Fortunately it almost never comes up in conversation.
I always wanted to be a procrastinator.
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Re: Thesis: "Ignore anyone using term 'Secular Bear'"

Postby leonard » Sat Jul 13, 2013 2:08 pm

Title says it all.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby zaboomafoozarg » Sat Jul 13, 2013 2:52 pm

AppelSienSapFrietjes wrote:If you are young, as we are (we are both 30)


30 is young? Sure doesn't feel like it to me, but maybe it will in 30 more years. :)

AppelSienSapFrietjes wrote:My final argument was: Now is a golden time for young investors to add.


This is true. I would add that any time is a golden time for young investors to add, if they're doing so for retirement.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby avalpert » Sat Jul 13, 2013 7:33 pm

AppelSienSapFrietjes wrote: Yes, I know we are in a bull market in the last years, but looking back to 2000, we are still in a secular bear market.


But looking back to 1983 we are still in a secular bull market...

Or, it is all bull. Why don't you tell us now what the indicator would be that we have switched from a secular bear to a secular bull market - since value of your investment going up isn't the key, what is?
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Re: Thesis: "Current secular bear market is an opportunity."

Postby Epsilon Delta » Sat Jul 13, 2013 7:39 pm

AppelSienSapFrietjes wrote: A new secular bull market might start today, tomorrow, next year, over 5 years, ...,

It is absolutely certain that a secular bull will not start today or tomorrow. If tomorrow is part of a secular bull the start will be back dated to the market bottom in 2009. Which is another way of saying "secular bull" should be initialized then reversed.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby John3754 » Sat Jul 13, 2013 10:23 pm

AppelSienSapFrietjes wrote:My additional argument is that the current bear market is going on for 13 years and it will stop eventually, if you look at the history...


So what you're saying is that, historically, bear markets eventually end and give way to bull markets, and you're predicting that this will again happen in the future?
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Re: Thesis: "Current secular bear market is an opportunity."

Postby michaelsieg » Sun Jul 14, 2013 12:07 am

Sometimes, if you use a term like secular, it is good to look at it's original meaning. In Latin, seculum means 100 years but it can also be used for a generation - anyways, it is a long time and the word secular means an event, that most people see only once in a lifetime or something that happens only once in a century. (mind you the crash at the end of the 1920s/early 30s is not yet 100 years old). I agree with Lifesoft and Nisi, it just does not make sense to call the current market a secular bear market, - not even sure you can call the current market highs a bear market.
But whatever you think it is, Mr. market tends to punish those who make forcasts. I really don't know where the markets are and where they are going, and investing accordingly (and stay diversified) is always prudent.
Just make the following mental exercise - let's say your friend (who is risk-averse) now invests heavily in equities and does not build a well balanced portfolio - how do you think will he feel if markets tank 30% or even 40% from the current high?
Instead of discussing if this is a bear or a bull market and making forcasts accordingly -better advice for your friend would be what Nisi said:
You should invest in stocks because in the past they have a pretty good return-for-risk profile over holding periods of several decades, not because you can guess whether the upcoming decades will be good or bad.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby ge1 » Sun Jul 14, 2013 6:45 am

I agree that investing today should provide you much better returns than investing in 2000, so that should provide comfort. on the other hand, the bubble of 2000 was of such epic proportions that the market today is still expensive if you look at Shiller P/e for example. Unlike many others here, I think the concept of secular market cycles is useful and think there will be much better investing opportunities in the next few years.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby avalpert » Sun Jul 14, 2013 7:09 am

ge1 wrote:I agree that investing today should provide you much better returns than investing in 2000, so that should provide comfort. on the other hand, the bubble of 2000 was of such epic proportions that the market today is still expensive if you look at Shiller P/e for example. Unlike many others here, I think the concept of secular market cycles is useful and think there will be much better investing opportunities in the next few years.

In 2011 did you think 'investing opportunities' would be better or worse in 2013?
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Re: Thesis: "Current secular bear market is an opportunity."

Postby AppelSienSapFrietjes » Sun Jul 14, 2013 7:35 am

avalpert wrote:
ge1 wrote:I agree that investing today should provide you much better returns than investing in 2000, so that should provide comfort. on the other hand, the bubble of 2000 was of such epic proportions that the market today is still expensive if you look at Shiller P/e for example. Unlike many others here, I think the concept of secular market cycles is useful and think there will be much better investing opportunities in the next few years.

In 2011 did you think 'investing opportunities' would be better or worse in 2013?


Better. We were lower in the secular bear market in 2011 than 2013.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby AppelSienSapFrietjes » Sun Jul 14, 2013 7:36 am

John3754 wrote:
AppelSienSapFrietjes wrote:My additional argument is that the current bear market is going on for 13 years and it will stop eventually, if you look at the history...


So what you're saying is that, historically, bear markets eventually end and give way to bull markets, and you're predicting that this will again happen in the future?


Yes and yes. That is obvious. If this were not true, nobody would be investing.

I am not saying when that will happen. All I am saying that this probably sooner now than in 2000.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby AppelSienSapFrietjes » Sun Jul 14, 2013 7:46 am

avalpert wrote:
AppelSienSapFrietjes wrote: Yes, I know we are in a bull market in the last years, but looking back to 2000, we are still in a secular bear market.


But looking back to 1983 we are still in a secular bull market...

Or, it is all bull. Why don't you tell us now what the indicator would be that we have switched from a secular bear to a secular bull market - since value of your investment going up isn't the key, what is?


A secular bull/bear market is a long trend of well-defined behavior. For example, 1982 to 1999 is a long upwards trend, 2000 to 2013 is a long flat trend. Either the current trend will continue, or we will have another upwards trend.

During a trend, it is perfectly possible that the market will have short-term heavy down- and uptrends, as in 2008-2009 for example. There is a difference between a bull/bear market (short term) and secular bull/bear market (long term).

You only recognize secular bull/bear markets afterwards. I have no idea when the current secular bear market will end and a new secular bull market will start. It will happen somewhere in the future, and it will happen sooner than in 2002, 2003, 2004, ..., 2011, 2012. That is an opportunity of confidence.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby ladders11 » Sun Jul 14, 2013 9:26 am

I don't think that there is any particular opportunity right now.

I would expect a secular bull market to start when valuations are lower and pessimism is more pervasive. In the last 12 months the S&P 500 has gone from 1329 to 1680.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby gwrvmd » Sun Jul 14, 2013 11:17 am

AppelSien:
If you let me pick the beginning and end dates, I can prove (or disprove if you prefer) any theory you throw at me.....Gordon
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Re: Thesis: "Current secular bear market is an opportunity."

Postby Kalo » Sun Jul 14, 2013 12:09 pm

The reason for your friend to invest or not invest should be about many things, but not about where we are in the cycle (even if we knew, which we don't).

A person's age, ability to invest (free cash over and above emergency fund and other short- or intermediate-term goals), personal risk tolerance, level of wealth, and probably other things I have forgotten, are more important than where we are in the cycle (even if we knew, which we don't).

If I were trying to convince a friend to invest who I knew was quite risk averse, I'd want them to read about asset allocation and try to come up with a personal AA that matched their risk tolerance, and then invest for long term goals, using that AA, and not try to time the market. Same for a friend who was quite risk tolerant, frankly.

Hey, this is pretty good stuff. I might save this off somewhere and try to follow it myself!

:beer

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Re: Thesis: "Current secular bear market is an opportunity."

Postby letsgobobby » Sun Jul 14, 2013 12:35 pm

If this is a secular bear market, then I am Mickey Mouse!
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Re: Thesis: "Current secular bear market is an opportunity."

Postby Phineas J. Whoopee » Sun Jul 14, 2013 1:45 pm

Pardon me, AppelSienSapFrietjes, for asking, and I'm emboldened by your labeling your point as a thesis, but aren't you begging the question?

Major premise: Right now is an opportunity for young investors because we're in a secular bear market.
Minor premise: We're in a secular bear market right now.
Conclusion: Right now is an opportunity for young investors because we're in a secular bear market.

You've re-asserted time and time again that we're in a secular bear market without responding to criticisms of your minor premise. I agree with others that cycles of 30 - 100 years can only be recognized long after the fact. To claim we're in a secular bear market so many times, as you've done in this thread, seems to me to be nothing more than an attempt at proof by repeated assertion.

I'll accept correction if you show me in what way I'm mistaken.

PJW
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Re: Thesis: "Current secular bear market is an opportunity."

Postby AppelSienSapFrietjes » Sun Jul 14, 2013 5:05 pm

Thanks for your reply. I have difficulties to see why there is so much disagreement that we are in a secular bear market. As far as I know, as secular bear market is a long trend of a flat market. Looking to the charts, the markets are more or less flat since 13 years (a bit up in US, still down in EU). Why isn't that an example an example of a secular bear market?

Please note that one liners such as "If this is a secular bear market, then I am Mickey Mouse!" or "If you let me pick the beginning and end dates, I can prove (or disprove if you prefer) any theory you throw at me.....Gordon" or do not help. Actually, I cannot find any explanation why my minor premise - we are in secular bear - is false to start with.

Returning the question, feel free to quote an argument or elaborate by yourself.

Thanks!
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Re: Thesis: "Current secular bear market is an opportunity."

Postby AppelSienSapFrietjes » Sun Jul 14, 2013 5:10 pm

michaelsieg wrote:But whatever you think it is, Mr. market tends to punish those who make forcasts. I really don't know where the markets are and where they are going, and investing accordingly (and stay diversified) is always prudent.
Just make the following mental exercise - let's say your friend (who is risk-averse) now invests heavily in equities and does not build a well balanced portfolio - how do you think will he feel if markets tank 30% or even 40% from the current high?
Instead of discussing if this is a bear or a bull market and making forcasts accordingly -better advice for your friend would be what Nisi said:
You should invest in stocks because in the past they have a pretty good return-for-risk profile over holding periods of several decades, not because you can guess whether the upcoming decades will be good or bad.


Thanks for your reply. But that's not really my point. It is not about timing and forecasting the market. It is about having confidence. I am saying that one should have more confidence in investing in the market now than 13 years ago. Flat markets will not go on forever, and by my logic, it is better to start investing later than sooner in a flat market.

It is indeed perfectly possible that the markets will tank 30/40%. It is possible that we will have another 13 years of flat markets like 2000 to 2013. I have no idea.

Please also note that I am not suggesting my friend to invest heavily into equities. I never said that. I am convincing him not to turn his back to equities and be sorry X decades from now on.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby letsgobobby » Sun Jul 14, 2013 5:54 pm

As others have said, the hypothesis is unprovable. To determine we are in a secular bear market, you will have to show that things are down over a very long period of time. As of right now, that is not the case: look at any ten year chart of VTSMX (TSM) and you'll see we have consistently made higher highs and the annualized return over that period has been 8.2%. If in the next few years the Dow makes a new lower low - ie, 5000 or 4000 - then you will have conclusively shown that we had been in a 'secular bear market' today. But you wouldn't know that until later.

On the other hand if we move steadily upwards from here and never revisit old lows, then you might say we are in a secular bull market that began in the spring of 2009. That happens to be my guesstimate, but again it's not provable and more than that, it's not actionable. Dem's just words.

To your original post, the opportunity in stocks was in the spring of 2009, ie, after a 60% loss, not after a 150% gain. To the extent that one believes in 'opportunities' at all - ie, market timing - that seems obvious. To the extent that there is no time like the present, sure, today is a buying opportunity. But so was yesterday and so will be tomorrow. None of it means anything. Bogleheads buy and hold the market, it is not helpful to us to know what the last 5 years of price action have been, because it tells us nothing about the future.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby ge1 » Sun Jul 14, 2013 6:57 pm

avalpert wrote:
ge1 wrote:I agree that investing today should provide you much better returns than investing in 2000, so that should provide comfort. on the other hand, the bubble of 2000 was of such epic proportions that the market today is still expensive if you look at Shiller P/e for example. Unlike many others here, I think the concept of secular market cycles is useful and think there will be much better investing opportunities in the next few years.

In 2011 did you think 'investing opportunities' would be better or worse in 2013?


I would have thought they will be better, but they are much worse now because the market has risen so much.

Similarly, I think they will be better investing opportunities in the next few years.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby avalpert » Sun Jul 14, 2013 8:41 pm

AppelSienSapFrietjes wrote:
avalpert wrote:
ge1 wrote:I agree that investing today should provide you much better returns than investing in 2000, so that should provide comfort. on the other hand, the bubble of 2000 was of such epic proportions that the market today is still expensive if you look at Shiller P/e for example. Unlike many others here, I think the concept of secular market cycles is useful and think there will be much better investing opportunities in the next few years.

In 2011 did you think 'investing opportunities' would be better or worse in 2013?


Better. We were lower in the secular bear market in 2011 than 2013.

And looking back, do you not think the returns do you not think the 32% increase in VTI since 2011 shows that the opportunity than was above normal?

You only recognize secular bull/bear markets afterwards. I have no idea when the current secular bear market will end and a new secular bull market will start.


Do you not see a problem in that? If you can only recognize them afterwards how do you know you are in one? Frankly, this is just BS of people making narrative stories afterwards based on observed trends to make them feel better about history. It is no different than the headlines that credit the news of the day for the market ups and downs - whatever they may be.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby michaelsieg » Sun Jul 14, 2013 10:08 pm

AppelSienSapFrietjes wrote
It is about having confidence. I am saying that one should have more confidence in investing in the market now than 13 years ago.

I wish I could agree, but I can't. Maybe it is because I am getting older and more cautious. I think the more confident you feel about an investment decision, the more cautious you should get - most mistakes happen if you are absolutely sure about something - like your assessment of the markets. The more prudent way to look at it is that we simply don't know.
Let me give you another argument:
I recently came across an interesting paper of Profs French and Fama it is called the equity premium, here is the abstract: http://papers.ssrn.com/sol3/papers.cfm? ... _id=236590). In this paper they retrospectively analyze equity returns in the US markets over 100 years and what they found is that the equity return in the second half of the last century was much higher than their discounted earnings growth or dividend growth models would have predicted.
So here is a word of caution, these are extremely bright authors, and they find equity returns were consistently higher than traditional discounted models of stock market returns (based on dividend or earnings growth) would predict - what makes you think that we are in a bear market? - I could make the argument, that markets are simply reverting to the mean and reverting to an average historical growth path.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby gmtret » Sun Jul 14, 2013 11:32 pm

Meh...comparisons are odious and nobody knows nuttin.
"Life is the enjoyment of emotion, derived from the past, and aimed at the future." Alfred North Whitehead
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Re: Thesis: "Current secular bear market is an opportunity."

Postby eucalyptus » Sun Jul 14, 2013 11:45 pm

"If you are young, as we are (we are both 30), there is a big chance that a significant part of your early career will be in a secular bull market."


If you are young, there is a big chance that you can work hard, provide something people want to pay for, and thereby make far more money than you ever, ever, ever will investing in equities. Looking for wealth in the equity markets is a loser's game.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby talisman » Sun Jul 14, 2013 11:57 pm

livesoft wrote:I always laugh when I read the words "secular bear|bull market" because they are just BS. I think a "'secular bear market" is the same as a bull market and a "secular bull market" is the same as a bear market.

The word "secular" is justed added so that folks who predict a bear or bull market can always be right. That is, they predict a bear market for the next year, then when everything goes up, they report back, "I predicted a bear market last year and I was right: We've been in a secular bear market for the past year." Or they predict a bull market for the next year, then when everything goes down, they report back, "I predicted a bull market last year and I was right: We've been in a secular bull market for the past year."

The market goes up and down and it really doesn't matter what you call it. OK, it does matter if you use the trademarked RBD designation because that really means something very specific.



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Re: Thesis: "Current secular bear market is an opportunity."

Postby Jim180 » Mon Jul 15, 2013 12:25 am

These secular trends can last anywhere from 8-20 years. We have had 2 cyclical bear markets occur within this secular trend. If we are in year 13 there is a possibility we could have one more cyclical bear market before the secular bull starts. I wouldn't push your friend too much if he is risk-averse. If we have another 40%-50% decline it could really hurt your friendship.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby Sidney » Mon Jul 15, 2013 12:59 am

Jim180 wrote:If When we have another 40%-50% decline it could really hurt your friendship.
I always wanted to be a procrastinator.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby pkcrafter » Mon Jul 15, 2013 1:28 am

AppelSienSapFrietjes wrote:
I have difficulties to see why there is so much disagreement that we are in a secular bear market.


I think you are making some classic behavioral finance errors with your premise about markets, but your intentions are good. It just would be a better approach to provide fundamental investing principles for your friend than to talk about secular markets.

On the matter of markets, take a look at this and see if you can tell us where the market is headed.

http://www.advisorperspectives.com/dshort/updates/Secular-Bull-and-Bear-Markets.php

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Re: Thesis: "Current secular bear market is an opportunity."

Postby yukon50 » Mon Jul 15, 2013 3:41 am

The last decade bonds/gold had higher than average returns.
And stocks had below average returns.

Because of this, think stocks are the best deal at the moment.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby grayfox » Mon Jul 15, 2013 4:14 am

AppelSienSapFrietjes wrote:Hi all,

Yesterday, I was discussing with a friend about investing. He is very risk-averse and I was trying to convince him to look into investing in equities. I had a difficult time :). At some point, the concept of secular bull and bear markets came up.

My final argument was: Now is a golden time for young investors to add. Historically, there is a rotation between secular bull and bear markets. We have been for 13 years in a secular bear market. A new secular bull market might start today, tomorrow, next year, over 5 years, ..., but at least - and that was my point - we already had 13 years. The current secular bear market will not go on forever. If you are young, as we are (we are both 30), there is a big chance that a significant part of your early career will be in a secular bull market. This introduces a lot of investing opportunities, since you can expect an above-average return somewhere in the "near" future. Since this might overlap with the early stages of our career, it might be possible to early retire. In other words, we should invest as much as possible now. Not only because of the traditional reasons (compounding effect, ...), but also because of the change that a secular bull market might start somewhere "soon".

How do you feel about this statement? What is your opinion?

Thanks!


How do you know we are in a secular bear market, or that there is even such an animal?

There are bear markets, which someone arbitrarily defined as 20% down from a peak. With that definition, I can look at historical prices and determine the points when we entered bear market. Same for bull markets.

Is there any definition of precisely what makes a secular bear market? If not, how can you say when the secular bear started or when it is over?

Like nisiprius says, it seems more like just finding patterns in random prices movements. You could flip a fair coin and find bull and bear markets, and secular bar markets if there was a definition.
Тише едешь, дальше будешь. (Quieter you-go, further you-will-be.)
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Re: Thesis: "Current secular bear market is an opportunity."

Postby gwrvmd » Mon Jul 15, 2013 1:52 pm

Jeffrey Sant, Raymond James Chief Investment Strategist, just announced on July 11 at the Raymond James Summer Development Conference that "We are smack-dab in the middle of a secular bull market that has run four years with more to go"
For you people that believe in this secular market babble, at least get together and decide if this is a secular bull market or a secular bear market....Gordon
Disciple of John Neff
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Re: Thesis: "Current secular bear market is an opportunity."

Postby Default User BR » Mon Jul 15, 2013 6:28 pm

I agree with some of what's been said. I don't think it's possible to determine what sort of secular market you're in while in it, assuming that they are even real.

As others have said, you could just as well argue that we're still in a secular bull market that had two rather sharp cyclic bear markets. But so what? There's no way to tell before the fact when these things shift. There's nothing actionable. Your best bet is to develop a consistent investing strategy and pursue it. This strategy should be one that you're "confident" in following all the time. Don't try to outguess the market, it'll slap you silly.



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Re: Thesis: "Current secular bear market is an opportunity."

Postby HomerJ » Mon Jul 15, 2013 6:46 pm

There's a rough generational pattern if you look back... but I don't know if that means anything going forward...

1913-1929 Bull market
1929-1946 Bear market
1946-1966 Bull market
1966-1982 Bear market
1982-2000 Bull market
2000-???? Bear market

All cycles lasting about 16-20 years. Generational.

I think they can only be determined looking back... The two big bull markets in the recent past (1946-1966) and (1982-2000) saw the market increase 700% (DOW went from 140 to 1000) and 1000%. (DOW went from 1000 to 10,000).

That's how I'd define a secular bull market... A huge run-up over multiple years.

From 2000-2013, we're nowhere near those numbers... We'd have to see DOW hit 70,000 or so to rise 700% above it's 2000 high water mark.

Those numbers seem insane don't they? But that's what people experienced in real bull markets in the past... 700%, 1000% gains over 20 years. We may never see those numbers again... But I'd expect the next big bull market to at least triple or quadruple the stock market.

Right now, we're still getting the last excesses from the 1982-2000 bull out of our system... We may see another crash, or stocks may start trending sideways again for a while... At some point, it's possible another big bull market may take off, and all the money we've invested over the last 13 years will really be worth something then...

But maybe not. History doesn't HAVE to repeat itself.
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Re: Thesis: "Current secular bear market is an opportunity."

Postby Joe S. » Mon Jul 15, 2013 7:36 pm

AppelSienSapFrietjes wrote:
My final argument was: Now is a golden time for young investors to add. Historically, there is a rotation between secular bull and bear markets. We have been for 13 years in a secular bear market. A new secular bull market might start today, tomorrow, next year, over 5 years, ..., but at least - and that was my point - we already had 13 years. The current secular bear market will not go on forever. If you are young, as we are (we are both 30), there is a big chance that a significant part of your early career will be in a secular bull market. This introduces a lot of investing opportunities, since you can expect an above-average return somewhere in the "near" future. Since this might overlap with the early stages of our career, it might be possible to early retire. In other words, we should invest as much as possible now. Not only because of the traditional reasons (compounding effect, ...), but also because of the change that a secular bull market might start somewhere "soon".


While I do not believe the "secular bear" market theory is useful for timing the market, it does appear your friend does. If you preface your remarks with "Assuming your secular bear market theory is true..." I have no problem with it.
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