Avoiding a Bear market

[Michael_00005]

For several years now I’ve been wondering how to deal with my investments when it comes to bear markets. We’ve had the 2020 drop and then the correction at the end of 2021, but these seem different as compared to a real bear market. But even these corrections are events that I want to avoid, now and in the future, but how to do this? Personally a new strategy feels more imperative, given the long bull market run, owing to low rates and the easing policy.

Largely owing to a lack a free time (and corporate job=slave) I never seriously got into reading books from the greatest all-time investors. This year began a change to correct that, and then just this past week, a video fully discussed exactly what I’ve been looking for (for several years).
For some of you this will be old news, but maybe helpful for someone with similar interests in avoiding bear markets.

Be for-warned, the video (bottom) is very long, but in my opinion worth watching from beginning to end. Much of what he talks about likely requires personal research, and reading of a few books to fully grasp the theory. The language Dr. Wish uses, and even his format and presentation are often discombobulated. But it should start to make sense with a little reading (re-watching) and testing with your own charts. It likely depends where you are at with investment material.

I found it mind-blowing he’s was able to be completely be out of the large bear markets of the past: (2001, 2008, 2020) and even the corrections like what we’ve seen in 2021. In reality the concept is pretty simple, and there are several great sites that will even point the way once you become acquainted with them.


He notes a collect of books to read in his talk, and I’d also recommend reading them as a combination. The main reason being, the various authors mentioned in his talk basically say the same thing. If you’re reading books and trying to adopt strategies from various sources it often only leads to confusion. So if you read material giving similar successful strategies you can avoid many problems.

My readings so far:
1. Trade Like a Stock Market Wizard – Mark Minervini
a. https://www.yahoo.com/now/2021-united-s ... 00406.html
2. How I made 2 M in the Stock Market – Nicholas Darvas
3. How to Trade Stocks – Jesse Livermore

I’ll likely read another book or two, but for the most part it’s really starting to sink in now. You can also find several YouTube videos covering the same material if interested.

Main video (2 hours long):
https://www.youtube.com/watch?v=AvUCoV-kjuk <- edit 3/31, this was the video I was meaning to add. The videos are similar but this one likely better
https://vimeo.com/239035379 <- ignore this link, sorry bout that:)


Supporting links:
https://www.wishingwealthblog.com/
https://www.investors.com/
fyi - I only paid for the $5 subscription (for several months use) to IBD (above), to get access to the basics... seems to work great for now. Edit 4/14/22 - to see the market trend on IBD (top left) you need to be subscribed, and then very important details like "Distribution Days", and "follow through days".

[sky]

I am not a financial expert but survived 2007-2008. Here are some observations.

Do not expect to time the market by using economic indicators. At the moment, the Russian belligerence and the China debt crisis are causing capital to flee to US equities. During periods of war, the markets become unpredictable. Don't make big bets by converting a large portion of your investment to cash expecting to buy back in after a crash. It might work but it might not.

During an actual bear run, the best strategy is to not withdraw funds from your investments. Get a job, live off the proceeds and invest as much as you can during a bear run. Maintain a balanced portfolio that matches your financial goals.

Bear runs generally do not last as long as bull runs. If you can hold out and not sell anything for a year or two, your investment will likely recover and you will be set up for the next bull run.

[Michael_00005]

Do not expect to time the market by using economic indicators.

Check out the 48:35 mark below. The method he uses is very simple, but it does keep him out of the market completely for periods of time.
https://www.youtube.com/watch?v=AvUCoV-kjuk

Everyone needs to do what they feel is best as far as strategies go. For me getting caught in bear markets is simply not worth the stress... assuming I can remain disciplined and follow the indicators.

[white belt]

I found it mind-blowing he’s was able to be completely be out of the large bear markets of the past: (2001, 2008, 2020) and even the corrections like what we’ve seen in 2021. In reality the concept is pretty simple, and there are several great sites that will even point the way once you become acquainted with them.

[…]

He notes a collect of books to read in his talk, and I’d also recommend reading them as a combination. The main reason being, the various authors mentioned in his talk basically say the same thing. If you’re reading books and trying to adopt strategies from various sources it often only leads to confusion. So if you read material giving similar successful strategies you can avoid many problems.

There is risk in sitting out bear markets because it might also mean sitting out the bull markets that follow (the COVID crash is a perfect example of this). There is also the risk of getting caught in a bull trap. Predicting bear markets is not that hard, but using that knowledge to make money is.

Have you read any of the foundational finance textbooks that Jacob recommends? I think those are much more useful to provide a basic understanding prior to evaluating the strategies of various “experts”.

[Seppia]

My readings so far:
1. Trade Like a Stock Market Wizard – Mark Minervini

Isn’t this the clown who went on TV and didn’t know what the business of the stock he was pumping was?

[chenda]

My advice would be to stick to property, pensions and cash.

[zbigi]

Predicting bear markets is not that hard, but using that knowledge to make money is.

Didn't plenty of people predict bear market way back in 2011 or 2012? I think we can even find incriminating posts on this forum.

[jacob]

Isn’t this the clown who went on TV and didn’t know what the business of the stock he was pumping was?

Jeremy Siegel famously and successfully traded green lumber thinking it was lumber painted green. Read more about here: https://www.amazon.com/Learned-Million- ... 231164688/ Taleb calls it the green lumber fallacy, that is, mistaking one kind of useful information for another kind. Also see, gamestonks.

[WFJ]

Is this an April Fool's joke?

https://ccjs.umd.edu/facultyprofile/wish/eric

The "Dr" has his PhD in criminal justice. If I had to choose to follow this "expert" of do the exact opposite, I would do the exact opposite. During a bear market there will be a TON of "I told you so" promoters who will reveal information "They don't want you to know" and other "insider secrets" as people get desperate. If this guy just matched the market for 50 years of investing, he'd be worth $50+ million and not waste hours doing presentations to sell investment seminars. This guy is a con-artist or a lonely quack.

Read "Random Walk Down Wall Street" ignore everything else until you understand this book.

[Humanofearth]

It’s too easy to miss the tops and bottoms. I lost money every time I tried. You may get lucky but your psychology and the uptrend cause most who try to miss far more trying to avoid the crash than is lost in the actual crash. Diversify your portfolio for better returns. Something that tracks m2 like the S&P 500 for some percent, some btc on a Cold Card for sovereign money, local fiat for surviving the feared bear market, some guns, ammo, and gold in case xyz reverts us to pre-internet.

[Michael_00005]

Lots of bashing of this post, but I sort of get it if you're not digging into the details and doing your own research on the subject, which is my guess here. If your casually looking at this tread and replying without investing (several hours/days) time into the research it's going to be a waste of time.

Isn’t this the clown who went on TV and didn’t know what the business of the stock he was pumping was?

Mark Minervini won U.S. Investing Championship 2021 with a total gain of 334.8%, and he won the challenge in the past as well. Don't get it, how do you bash Mark Minervini with these types of gains?

Have you read any of the foundational finance textbooks that Jacob recommends?

Nope, all of the books noted in the video are people who made huge sums of money investing. The theory is to read books from the best investors of the past.

My advice would be to stick to property, pensions and cash.

Thanks, and totally agree on property... hope to buy this year!

The "Dr" has his PhD in criminal justice.

He openly talks about this in the video, he also notes his work is charity with a few minor exceptions. He said he's avoided major crashes, and in listening to him, I believe him. Call it instinct if you want; he's not selling me anything, being on his email list is free, as is his website! LOL, my recommendation to you, would be to do whatever you want!

The U.S. is at the tail end of a huge bull market, and it seems probable there will be a day of reckoning eventually - the price tag of: high debt, low rates and easing policies which offered short term benefits. The current policy feels like: enjoy now, pay later. We see the same thing with people who can't save or attain FIRE.

For the record Dr. Wish recommended moving to cash, Friday, 4/1/2022, mentioning higher risks, and failed setups. Today, 4/7/2022 his recommendation was stronger (cash or short) given some of the metrics he looks at, which he posts on his site. Keep in mind the market can turn up and down, and with it the market momentum; his aim is to accept smaller losses, to avoid huge losses. When the trend returns to upward is when he looks to buy. So this does not necessarily mean this is the start of a huge bear market, just the potential as the 30 wMA trends downward.

I'm only sharing something that looks good to me, if you don't like it - ignore it. All kinds of advice out there.

[Humanofearth]

What if the bear market already happened in March 2020 and increasing the money supply 50% in 2 years distorted the denominator in S&P500 shares/usd while increasing confidence in assets and lowering confidence in fiat?

Been 2 years since a deep bear. Maybe not really all time highs when accounting for usd dilution?

[Michael_00005]

What if the bear market already happened in March 2020

My take on 2020 was fearmongering (rather than a real bear), and then prices shot straight back up to new all time highs. But I do get what you are saying, when does the bill come due? I see home prices as real inflation, even though it's not technically counted as such. Many are getting priced out of the market. Younger adults who don't own a home will likely feel it most.

[Humanofearth]

a real bear… when does the bill come due?

Based on *, the S& P is up ~338% including dividends since March 2000. Based on **, M2 was 4700 in March 2000 and is 19,404 now. So up 4.12x, making it a 312% increase. 338%-312%= 26% increase in 22 years with several 50% crashes. This sounds like it tracks m2 growth more than anything and doesn’t contribute to a real increase of purchasing power as you’re down just paying taxes on dividends, way down if you include capital gains taxes. In my mind, you’re seeing hyperinflation of a currency relative to scarce assets. The harder to produce, the larger the inflation.

The bill is being paid by those paid and saving in the currency, workers, pensioners, bond holders. There was an article from bloomberg telling those who make under 300k a year to eat lentils and take the bus***. Food price increases are up so much that the government went from blaming Covid to Putin, anything but dilution of the money supply as they cannot stop printing at this point. They stop, prices crash, nobody can sell their stocks because nobody has cash to buy, everybody starves vs keep printing and finding a scapegoat, collect taxes on these inflated assets, stay afloat long enough till hopefully automation drives food prices down enough so that people can live in pods being tubed cricket protein steaks while enjoying vr games so they don’t care about the fact that they’ll never own a house or any scarce assets unless they take extreme risks investing or producing. This is the price as the currency goes to 0 while cheap consumables necessary for survival and extremely addictive entertainment also go to 0.

The average investor is rekt. All the volatility and counterparty risk with virtually 0 reward. What can they do? Gamble on ape coins and GameStop hoping for a homerun? Buy speculative cryptographically secured coins? Of which, the only decentralized one with a non scammy background has gone from under a cent to over 45,000usd. Can it really go to millions a coin? Maybe if it’s the only sound money and then most assets are in deflation relative to sound money, which most think is a scam at first glance. It kinda is. But it’s less scammy than anything else at this point. Cash flow stocks fail to beat m2. Only the nasdaq stocks beat it but again, high risk gambles. Or take a moonshot to build a decentralized stable coin backed by another scam, build a rocket to Alpha Centurai A, fix a problem for billions of people. Most won’t care enough to do the work, they got all the movies and shows they could ever want. Let’s play Minecraft and COD while trolling on Twitter. Even the rich crypto kids with billions are just trolling Twitter now instead of hopeful they’ll contribute to something larger. Addicted to gambling and trolling. People lost hope, this is a stage in the collapse of an entire system.

We’re not used to having these numbers distorted in the way they are. Savers want the safest thing. Considering that any asset has counter party risk except the most ridiculously priced of these speculative coins held on a Cold Card with a seed engraved in metal and ideally multi-sig with the estate/trustees across several continents, most will end up only able to consume the cheapest entertainment and calories for survival.

*
https://dqydj.com/sp-500-return-calculator/
**
https://fred.stlouisfed.org/series/M2
***
https://www.bloomberg.com/opinion/artic ... er-300-000

[prudentelo]

Powerful argument.

Interesting that many ER spending doesn't go up nominally though.

[Lucky C]

[advice removed]

[Michael_00005]

You're never going to time the top perfectly, so you have to pick between two options: be too early or be too late.

With charts you can go back in time to any previous bear market and review the metrics you use to see how they faired. Dr. Wish uses several tools to gauge momentum, but one of his main tools is the 30 week moving average (wMA) on the QQQ/SPY. He goes over this in the 2 hour long video linked above, he also shows the exit and re-entry locations using his tools from past bear markets. Apparently people have been doing this 30+ years.

Did you watch the video? Somehow I get the impression you did not. He's NOT talking about a guessing game that he does not use himself, as he mentions, he's been using a similar but modified system since the 1980's.

Again... if you're not going to do the research, watch the video, review the material it will do you no good (caps removed to avoid hurting anyone's feelings:). A lot of effort goes into making a presentation like this, and it's being given away for free.

[Lucky C]

I have already developed my own trading systems and am beyond the need to research how others develop theirs. I have been financially independent for several years and have more experience than you in the drawdown mitigation game. I could give you a lot of advice about what should work with your chosen strategy and the possible pitfalls, as well as the best resources to further explore (and some to ignore and why), but instead I will just give you one more piece of advice: don't be a dick.

[Michael_00005]

I have already developed my own trading systems and am beyond the need to research how others develop theirs.

That's important to know. What part makes you angry in my reply, was it asking if you watched the video?

[Seppia]

Mark Minervini won U.S. Investing Championship 2021 with a total gain of 334.8%, and he won the challenge in the past as well. Don't get it, how do you bash Mark Minervini with these types of gains?

Cathie Wood is still up VS any major index since inception and in the last 5 years, that doesn't make her less of a clown and adjusted for inflows her fund was a major value destroyer. Chamath made a killing for himself in the last 5 years, but those who invested in his SPACS did not make it as great. Hussman predicted (and profited) from the GFC greatly, but since then has proceeded to incinerate capital for 13+ years.

What I am trying to say say is that past performance of any investor alone isn't a good reason to follow their advice.
People can be right for the wrong reasons (hence not repeatable), their interests may not be aligned with yours (is their goal to make you money or to sell you a book?), your brain could not be wired to sustain their winning strategy (a suboptimal strategy that you can stick to almost always will lead to better results VS a strategy that's superior in hindsight but that may scare you off at the worst possible time, for example).

In general, what I have learned in my almost 20 years investing, is that I am never really 100% certain of anything.