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| The Dark Side of Deficits | August 27, 2010
 | | Secular Bull and Bear Markets | | It's Not the (Stupid) Economy | | The Consequences of a Credit Crisis | | The Dark Side of Deficits | | LA, Europe, Kansas City, and Houston |
In the pre-crisis days, I used to write about
things like P/E ratios, secular bull and bear markets, valuations, and all of
the things we used to think about in the Old Normal. But what about those
topics as we begin our trip through the New Normal? It's time to reconvene
class and think through what might change and what will remain the same. I
think this will be a fun read - and let me tip my
hand. I come out on the side of a new secular bull that gets us back to trend -
but not just yet. The New Normal has to have its turn first. (Note: this will
print out longer than usual, as there are a lot of charts.) And speaking of first, I once again need some
help from readers. I will be in "jail" next week for the Muscular Dystrophy
Society. I need you to help bail me out. You can go to
https://www.joinmda.org/downtowndallas2010/johnm
and make a donation to help kids and families who really need help in
these difficult times, and also help sponsor research that will eventually cure
this disease. If you follow the link, you can see a cute video - and then make
your donation! I thank you and
I am sure Jerry's kids thank you too! Market analysts (of which I am a minor variety) talk
all the time about secular bull and bear cycles. I argued in this column in
2002 (and later in Bull's Eye Investing) that most market analysts use
the wrong metric for analyzing bull and bear cycles. (For the record, even though I am talking about
the US stock market, the principles apply to most markets everywhere. We are
all human.) "Cycles" are defined as events that repeat in a
sequence. For there to be a cycle, some condition or situation must recur over
a period of time. We are able to observe a wide variety of cycles in our
lives: patterns in the weather, the moon, radio waves, etc. Some of the
patterns are the result of fundamental factors, while others are more likely
coincidence. The phases of the moon occur due to cycles among the moon, the
earth, and the sun. In other situations, though, apparent patterns are no more
than the alignment of random events into an observable sequence.
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