Being Bearish Is Not Profitable

Being Bearish Is Not Profitable

It’s easier to find financial experts views that are extremely bearish than it is to read bullish views. Since 2009 it has not been profitable to be bearish, and yet these smart economist have been calling for a crash. A broken clock is right twice a day and when the next bear market happens all the economist that where bearish will be right.

There are soooo many reasons that the market shouldn’t be hitting new highs.
Valuations, all the crap in Europe/Japan/China, Trump, rising interest rates, tapering QE, natural disasters, Rocket Man blowing countries up, and that’s just a few.

If history repeats, we will eventually see a bear market and a recession. A recession is typically defined as a decline in GDP for two or more consecutive quarters.

 

US Recessions (1945 to Present )

Recessions/GDP Contraction/Length to next
                                                            Recession
Feb 1945-Oct 1945      -12.7%            3 years, 1 month
Nov 1948-Oct 1949     -1.7%              3 years, 9 months
July 1953-May 1954     -2.6%             3 years, 3 months
Aug 1957-Apr 1958      -3.7%             2 years, 0 months
April 1960-Feb 1961     -1.6%             8 years, 10 months
Dec 1969-Nov 1970      -0.6%             3 years, 0 months
Nov 1973-March 1975  -3.2%             4 years, 10 months
Jan 1980-July 1980        -2.2%            1 year, 0 months
July 1981-July 1982       -2.7%             7 years, 8 months
July 1990-March 1991   -1.4%            10 years,0 months
March 2001-Nov-2001  -0.3%              6 years,1 month
Dec 2007-Jun 2009        -5.1%              ???????????????

Average: 11 months   -3.2%    4 years, 8 months

 

My Portfolio

Since early 2017, I have been on the sidelines scratching my head as the equity markets have been going up. I have been holding more cash than I would normally. I haven’t sold anything I just haven’t purchased anything new and have been keeping my distributions in cash instead of reinvesting it. (Not smart).
I am obviously not very good at timing the markets. Not that I am really trying, I thought I would wait to see how the new Trump administration would do, and then it was summer and you know the saying “sell in May and go away.” The Fall usually is fairly volatile with big swings in the market.

I’m now looking at investing the cash we have in our portfolio when the market is hitting all time highs. We have a long time horizon and timing the market is absolutely pointless. What’s really important is saving regularly, diversifying, keeping cost low, and stay invested.

 

Don’t wait for retirement to enjoy life !!

Comments

  1. I’m not good at timing the market either. Sitting on the sidelines with cash while watching everything go up is not very fun lol.

    That’s why I make myself dollar cost average ETFs regularly on a monthly basis.

    This stretch is a long time. Everyone knows it and feels it, I think people are prepared (except Bitcoin investors) for the next crash.

    • Hi GYM I totally agree with DCA monthly. Up until this year I have been DCA Quarterly(reinvest dividends and my contributions) so one of 2018 resolution will be to continue with the quarterly dollar cost averaging. If there is a market correction of any size I will up my contributions.

  2. Good point, Steve. I agree that attempting to “time the market” is an exercise in futility. Markets often appear to have a mind of their own and I find that just automating my investing has been the best approach. I think the financial markets have been on an excellent ride since 2008, and will eventually suffer a correction. When will that happen? Your guess is as good as mine.

    • Hi Enoch . I am nervous about this bull market (who knows when it will end) but what’s really important is saving regularly, diversifying, keeping cost low, and stay invested.

  3. Hey Steve,

    I think this is a very normal phenomenon. If people aren’t feeling like everything is high right now maybe they are? The truth is though that no one knows what way the markets will move. In my opinion time in the market is better then timing the market!

  4. Steve,
    My feelings and actions have been somewhat similar to yours this year. I haven’t stopped investing in the market, but have slowed my purchases and am sitting on more cash than I would have anticipated.

    You might consider adding up your invest-able cash on hand plus excess cash generated over the next 12 months and come up with a monthly amount you commit to the market. It’s a DCA strategy of course. That way you will get some benefit if the market continues to go up and have some funds ready to deploy if it goes down.

    That is pretty much what I am doing, even though I have reduced my monthly investments as the year has gone on.

    Tom

  5. Steve, I’ve started to second guess my market timing inclinations also. In fact, I’m looking at a private wealth manager that’s a full fiduciary to help me protect me from me! I’ve begun to adopt the belief that the best time to invest is NOW, so long as you’re in it for the long run (two decades or more).

    • Hi Michael, I like that (protect me from me) We can certainly be our worst enemy and I agree the best time to invest is now.

Leave a Reply

Your email address will not be published. Required fields are marked *