Thursday, October 30, 2008

Finding the Bottom

There is only one cause that brings the bull market to its knee, which is when companies doing bad or the entire economy is doing bad.

That was easy, we can tell when we reached the peak and get out before the big crash (down 40%) but what takes the stock market out of the bear market? To make investing life simple, I want to get the clear clue. The simple answer is when economy starts to turn around. That’s true, but we will be way above the bottom. So it isn’t that useful.

If I look back at the peak of the bull market, people ignore all the fundamental and buy whatever the media suggest. So, same scenario for the bear market is the capitulation point where people sell regardless the fundamental. The bottom should be at the maximum fear. That’s when the economy seem like it will never recover, we will never get any job, business revenue will keep losing.

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Saturday, October 4, 2008

Catch the Bull & Avoid the Bear.

How could we miss all the signals that were telling us the bear market(credit crunch) is coming?

I have already been hit by the worst financial turmoil in my first year of investment career. But, as long as I have a full time job providing me cash flow to invest, this bear market driven by credit crunch is probably the best lesson. It also prepares me for the future bear markets to come. Oh I am learning from the best-worst bear market.

We better learn from the our past and benefit it for our future. Here is a graph that pretty much telling us all the signs of pre-bear market and pre-bull market. Catch the bull and avoid the bear:

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